External Analysis

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External Analysis

The Company

Formed in 1985, Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, working in 68 nations. Starbuck buys and dish amazing espressos they offer, alongside high quality espresso, tea and different refreshments and an assortment of crisp nourishment things, including nibble offerings, through organization worked stores. They likewise offer an assortment of espresso and tea items and permit the company trademarks through different channels, for example, authorized stores, basic supply and foodservice accounts. Notwithstanding their lead Starbucks Coffee brand, they offer merchandise and administrations under the accompanying brands: Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange and Ethos.

Starbucks have four reportable working sections:

1) Americas, which is comprehensive of the U.S., Canada, and Latin America; 2) China/Asia Pacific (“CAP”); 3) Europe, Middle East, and Africa (“EMEA”) and 4) Channel Development.

They likewise have a few nonreportable working sections, including Teavana, Seattle’s Best Coffee, Evolution Fresh, and Digital Ventures business, and in addition certain creating organizations, for example, the Starbucks Reserve Roastery and Tasting Room, which are joined and alluded to as All Other Segments.

Our Channel Development fragment incorporates roasted whole bean and ground espressos, Tazo teas, Starbucks-and Tazo-marked single-serve items, an assortment of prepared to-drink refreshments, for example, Frappuccino, Starbucks Doubleshot and Starbucks Refreshers refreshments, and other marked items sold worldwide through channels, for example, supermarkets, stockroom clubs, claim to fame retailers, comfort stores, and U.S. foodservice accounts.

The brand produces about the majority of their incomes through organization worked stores, authorized stores, buyer bundled merchandise (“CPG”) and foodservice operations. 1

Company-operated and Licensed Store Summary as of September 27, 2015 – Appendix 1 1

Revenue – Appendix 2 1

Five Force Analysis

Threat of New Entrants: Barriers to Entry – HIGH

The risk of new market entrants is high as the hindrances to enter the business are low. Organizations can without much of a stretch lower their introductory capital expenses by renting the required capitals. Also, franchises make the entry to the business considerably easier as everything is accessible for franchisees through the establishment understandings. In any case, because of the profoundly soaked business sector, it is hard to contend with Starbucks given its high image awareness and piece of the pie in the business.

The accompanying external forces add to the moderate power of the threat of new participants:

· Moderate expense of doing business (high)

· Moderate production network cost (moderate)

· High cost of brand improvement (low)

Bargaining Power of Suppliers – Moderate to High

The haggling force of suppliers is moderate to high as the cost of coffee beans is expanding. As Starbucks endeavors to convey excellent coffee beans to its shoppers, the expense of acquiring beans is generally high. Since there is an increasing demand for coffee worldwide and and coffee beans are produced in specific nations on the planet, suppliers of coffee beans hold higher dealing power.

Bargaining Power of Buyers – High

Starbucks Coffee encounters the solid compel or haggling force of purchasers or clients. In the Five Forces analysis model, this power depends on the impact that individual and grouped clients have on business. In Starbucks Coffee’s case, the accompanying outer components add to the solid bartering force of clients:

– Low exchanging cost (high) – Substitute accessibility (high) – Small size of individual purchasers (low)

In this segment, the dealing force of purchasers is likewise among the most noteworthy strengths influencing Starbucks Coffee’s business. Clients can without much of a stretch movement from Starbucks to different brands since it is moderate to do as such. Customers can likewise avoid Starbucks in the event that they need to, on the grounds that there are numerous substitutes, for example, instant refreshments and beverages from eateries. These solid elements dominate the way that individual buys are little contrasted with Starbucks Coffee’s aggregate incomes.

Threat of Substitute Products – High

Starbucks Coffee additionally encounters the solid power of the danger of substitutes or substitution. In the Five Forces analysis model, this one relates to the effect of competitors on each other. In Starbucks Coffee’s case, the accompanying outside elements add to the solid power of the risk of substitution:

– Availability of substitutes (high) – Low exchanging cost (high) – Low expense of substitutes (high)

This segment of the Five Forces model shows that substitutes can possibly contrarily affect Starbucks Coffee’s business. Starbucks clients can without much of a stretch movement to substitutes on the grounds that there are numerous substitutes, for example, drinks from eateries, and moment and packaged refreshments and different products from markets.

Rivalry Among Competitors – High

Starbucks Coffee confronts the solid power of aggressive contention or rivalry. In the Five Forces analysis model, this power relates to the impact of contenders on one another. In Starbucks Coffee’s case, the accompanying outer components add to the solid power of rivalry:

– Large number of firms (high) – Low exchanging cost (high) – Variety of firms (moderate)

This part of the Five Forces investigation demonstrates that opposition is among the most imperative of Starbucks Coffee’s worries. The organization confronts an extensive number of contenders, which have diverse sizes, claims to fame and systems. For instance, Starbucks faces the aggressive power of McDonald’s and Dunkin Donuts, and in addition to other specialized coffee companies. Because of these high industry fixations and the rivalry already specified above, industry contention is high for both the US and Canadian market.

Starbucks Trends’

Here are three hot trends heading our way as the IoE begins showing itself via digitally-savvy brands like Starbucks :

Environments will offer different interactive experiences to customers on each visit.

The Starbuck-Spotify arrangement is the salvo toward guaranteeing each guest has another in-store encounter each time they come to Starbucks. Whether you’re paying for java with points or asking for your most loved tunes, you’re working in a digital domain that – on account of the cloud – can get to be more intelligent and more brilliant with each visit. Youthful buyers need to draw in with their surroundings utilizing intelligent gadgets, including watches and wearables, so music is only one layer of a considerably more full experience Starbucks is engineering as the IoE ventures into more innovation stages.

Digital variety drives novelty even when the physical environment is unchanging.

Regardless of the fact that clients visit the same definite Starbucks store each morning, the Spotify bargain helps the Starbucks brand create novelty within an unchanging physical footprint. Shared playlists guarantee that compensates individuals can get to the music they prefer regardless of the possibility that the music a client has asked for plays subsequent to completing their latte. For retailers or automotive companies, digital innovation holds huge key quality when changes to a physical footprint impression are excessive. As opposed to continually revamping the inside of a car or a store design, spilling encounters will be the impetus that changes boring into brilliant.

Digital payment systems will operate beyond standard currency in captive environments.

Starbucks favored prizes clients definitely know that it is so natural to pile up points, however now they can arrange up their music through a pay-with-points arrangement. We will begin to see broadening acceptance of “smart transactions” that don’t include standard currency, especially among brands that have worldwide stages. Hope to see organizations like AT&T, Verizon and significant hoteling companies like Hilton utilizing pay-with-points as a part of ways that support their client reliability, and give aggressive separation. These projects are just a stage far from connecting computerized exchanges to autos or “keen machines” that will be our consistent partners in the IoE.

Opportunities & Threats

Opportunities 1, 3


Business acquisition provides various inorganic opportunities to the company. In September 2014, the company announced to acquire the remaining 60.5% share in Starbucks Coffee Japan, Ltd., a joint venture between Starbucks and Sazaby League. Japan is the company’s second largest market in terms of retail sales. The acquisition will allow the company to accelerate growth across multiple channels in the country, including the potential introduction of new concepts, such as Teavana. The acquisition is expected to complete by the end of first quarter 2015.

Market Entry

Starbucks has plans to enter Colombia, Bolivia and Panama within a next year through licensed agreements with long-time business partners. The company has more than 740 stores and 10,000 partners in 12 countries in Latin America. Starbucks is much more than retail story, however, and we believe the company is just starting to scratch the surface of its longer-term channel development, brand diversification, and geographic growth potential. We’re also optimistic about mobile, digital, and loyalty program synergies across the various business lines and through new partnerships including Spotify, New York Times, and Lyft. Starbucks’ international opportunities are undeniable– particularly in China, India, Japan, and Brazil–and we believe best practices from the U.S. can be applied to these regions to accelerate growth. Competitive threats exist in both the retail and wholesale channels, but a wide moat built on strong brand equity, bargaining clout with suppliers of all kinds, and a leverage able model will help to stave off rivals.

Growth Markets

The hot drinks market in Asia has traditionally been dominated by tea consumption, rather than coffee. However, according to International Coffee Organization’s (ICO) 2012/13 review, the Asian coffee market has increasingly become the focus of the world coffee industry. Asia reported the most dynamic growth in coffee consumption in the world, growing by an average rate of 4% per annum, increasing to 4.9% since the year 2000. Coffee consumption in the region has been growing.

Threats 5

· Changes in economic conditions worldwide as well as in the United States may pose a threat to the Company’s financial health. Part of Starbucks ongoing success relies on the value of its brand, especially by making sure its business partners actions are deemed acceptable.

· Starbucks confidential and proprietary information, whether it comes from its customers or employees is very important. Any nefarious access, theft or destruction does pose a threat to its brand reputation that can have negative financial and brand implications.

· Business can also be harmed by the mishandling of food, contamination, mislabelling or other food-borne illnesses. Public and medical opinions mainly related to consuming Starbucks products may also have a negative effect on its business.

· Starbucks’ operations rely heavily on information technology. Avoiding the material failure, inadequacy, interruption or compromised security of this aspect of our business is key to avoiding financial problems for Starbucks.

· Should Starbucks fails when it comes to implementing strategic initiatives or responsibly managing growth the company can expect this to have undesired effects on their business.

· Starbucks’ competition is across all channels and markets and which may pose a challenge when it comes to maintaining profitability. Their operating segment in the Americas is one which the company is highly dependent on the financial performance of. In order to achieve growth targets, Starbucks as an international brand is becoming increasingly dependent on CAP and EMEA segments preforming successfully.

· Price increase in the cost of Arabica coffee beans of sufficient quality as well as other commodities as well as the decreased availability do pose a threat to the company’s financial well-being.

· Also, the financial results Starbucks achieves for can be threatened by several factors that are outside of the company’s control.

· Starbucks supply chain is crucial to produce and deliver product and interruptions can become a problem when it comes to maintaining profitability.

· Starbucks stocks price and volatility can also be threatened by their inability to meet the public’s expectations for the business and Starbucks as a whole.

· Should Starbucks lose valuable employees or have trouble adding new members this may have a negative effect on financial results.

· Laws and regulations, no matter how they change should be adhered to any trouble doing so will have an adverse effect on Starbucks financial health.

External Environment

General Environment 4

Demographic Segment:

Starbucks has customers of all age levels, however there are two essential age sections that have a tendency to consume Starbucks Coffee: the baby boomers and the millennials. The baby boomers normally are good earners, showing the more prominent probability of purchaser spending on coffee and snacks. As far as the millennials is concerned, they have a tendency to spend more on eating out than other age fragments, demonstrating an extraordinary potential in empowering the sales.

Economic Segment:

A positive connection of discretionary cashflow and consumer spending appears to apply to the coffee and snacks shops industry. At the point when purchaser’s income increases, spending in the business increments as needs be. It is normal that customer spending on coffee and snacks rise in 2015, along these lines seeing an expansion in deals for Starbucks as it is one of the significant players in the business.

Political Segment:

The coffee and snacks industry is liable to couple of regulations and that changes from nation to nation. A portion of the regulations incorporate food security and standards, labour relations, smoking bans and franchising laws.

Sociocultural Segment:

In the course of recent years, buyers are moving to a more healthy lifestyle, in which numerous are searching for low fat and low sugar items. With a specific end goal to keep the sales and keep up its position in the business, Starbucks need to adjust to the expansion of their menu with more nutritious options for their customers and they have alternatives for customers to look over.

Technological Segment:

Keeping in mind the end goal to bring quality service and lessen customers hold up time, companies need to put resources into gear to minimize coffee preparing time, purpose of offer frameworks to help store proficiency, also put resources into portable applications to convey further comfort to its customers. Likewise, numerous businesses had begun to market themselves on online networking platforms to interface with its customers in fortifying brand loyalty.

Industry Environment 4

Bargaining Power of Suppliers:

The bartering force of suppliers is moderate to high as the cost of coffee beans is on the rise. As Starbucks endeavors to convey amazing coffee beans to its customers, the expense of obtaining beans is generally high. Since there is a popularity of coffee all around and beans must be created in specific nations on the planet, suppliers of coffee beans hold higher haggling power.

Bargaining Power of Buyers:

The negotiating force of purchasers is high. Firms in the business vie for customers on the basis of value, area, quality, consistency, style, presentation, nourishment extent, assortment, and administration. This joined with the way that customers face insignificant exchanging costs implies that the bargaining force of purchasers is moderately high.

Threat of Entry:

The risk of new participants is high as the boundaries to enter the business are low. Organizations can without much of a stretch lower their leasing so as to start capital expenses the required capitals. Besides, establishments made the section to the business much simpler as everything is accessible for franchisees through the establishment understandings. Be that as it may, because of the profoundly immersed market, it is hard to rival Starbucks given its high brand image and piece of the pie in the business.

Threats from Substitute Products:

The danger from substitute products is high as customers can drink different refreshments, for example, tea, water, juices, caffeinated drinks and soda pops. The business confronts outer rivalry from the more extensive food segment. This incorporates fast food eateries like McDonalds, or other full service eateries that offer feasting and take-out administrations.

Industry Rivalry:

Industry contention is high. As mentioned above, companies within the industry compete on a huge number of elements including costs, quality, area, and administration. The US market has a medium level of focus, with Starbucks Corporation and Dunkin’ Brands Inc. representing 42.4% and 25.5% of aggregate market share of the overall coffee & snacks industry separately.

In Canada, the industry focus is higher, with Tim Hortons Inc. and Starbucks Coffee Company representing 69.9% and 15.2% of aggregate market share of the overall industry individually. Because of these high industry focuses and the premise of rivalry beforehand said, industry competition is high for both the US and Canadian market. In any case, we take note of that industry contention is medium in the Chinese market as the business fixation is fundamentally lower.

Competitor environment 5

As discussed earlier, the rivalry or rather say intense competition in the Chinese Café industry is medium and the pattern is increasing. The focus in this industry is low, with the main four organizations of the business representing an expected 15.4% of aggregate industry income in 2014. The main three players in China are Starbucks with 6.7% piece of the pie; Costa Coffee China with 5.9% share of the overall industry and Beijing McDonalds Foods Co., Ltd. with 5.1% share of the overall industry.

In Canada, the competition and the trend is increasing. The fixation in the business is high. The main four players in this market segment have an expected piece of the share of 89%. Tim Hortons Inc, with 69.9% share of the overall industry, is “synonymous with coffee in Canada”. It is the biggest food service business in Canada, and offers a wide scope of food and refreshment menu that includes: soups, sandwiches, wraps, baked food, premium-mix coffee, teas, icy refreshments, fruit smoothies, and other coffee based speciality drinks. Tim Horton’s showcasing stresses its place as a national symbol, and the organization has consequently turned into a social symbol.

Rivalry in the US is high. The main four players in this industry are evaluated to represent 72.6% of the aggregate piece of the pie. Dunkin Brand’s Inc., a worldwide retailer of doughnuts, espresso and dessert, which represents 25.5% of piece of the overall industry has more than 10,000 locations in the US. Dunkin’s plan of action permits them to extend quickly, in which more than 99.0% of its retail stores are being worked under franchise agreements.

Market Share of Major Players – Appendix 3 5

Competitor Analysis Components

Future objectives

Market Penetration

Starbucks Coffee’s primary concentrated development strategy is business sector entrance. This concentrated technique bolsters the company’s development by expanding incomes from existing markets. Starbucks as of now has vicinity in 65 nations around the globe. To boost incomes and development in these present markets, the company applies the market penetration strategy by opening more company-owned stores. Starbucks additionally applies this serious technique for development through licensing for merchandise and franchising in a few nations, for example, the Dominican Republic.

Market Development

Starbucks Coffee utilizes market advancement as its auxiliary escalated development strategy. This concentrated procedure bolsters the company’s development by producing incomes in new markets or market sections. For instance, Starbucks Coffee plan to enter more nations. These nations are for the most part in Africa and the Middle East. In this escalated technique, Starbucks develops by growing its global reach.

Product Development

As a form of growth strategy Starbucks Coffee utilizes product development to the best extent. This methodology includes making new items to increase revenue. In the process Starbucks keeps advancing its product mix. For instance, after the firm acquired The Coffee Connection, it began offering Frappuccino at Starbucks cafes. The company likewise launched sodas in 2014. Through such new items, Starbucks develops through this strategical move.

Quality Consciousness

Moreover, by utilizing the experience gained through traditional store model, Starbuck keeps on offering buyers new coffee and different items in an assortment range across new classifications, and through various channels. Using Global Responsibility procedure, Starbuck is committed to source top notch coffee beans and contributing emphatically to the community Starbucks does business in.

Current Strategy

Business Level Strategy: Differentiation

Starbucks’ general business level system concentrates on offering the finest quality espresso, tea and related items, and by furnishing every client with an extraordinary Starbucks Experience. Starbucks separates themselves from it’s rivals through the Starbucks Experience, which is based upon prevalent customer service orientation and clean and very much kept up brand operated stores that are redone to mirror the identities of the communities in which they operate. This implies while Starbucks is focused around giving their customers an assorted range of products in an upscale environment, and likewise is centered around giving a unique experience to its customers. These components joined permit Starbucks to execute its separation technique and along these lines build a high level of customer loyalty.

Corporate Level Strategy: Related Constrained

The Starbucks brand was based on espresso aka coffee, yet Starbucks has likewise ventured into various product offerings. From Starbucks’ 2015 10-K form, we can see that their income blend can be broken into the accompanying expansive item sorts: Beverage (58%), Food (16%), Packaged and single-serve espressos Teas (14%), and Other (12%). From this we can see that Starbucks unmistakably takes after a related compelled broadening strategy, whereby 50-70% of sales are from one territory however the connections between business territories are direct.

Starbuck revenue mix broken by product types – Appendix 4 1


Starbucks makes several assumptions as a large corporation, one of which is that their globalization strategy makes financial sense. The ability to grow and succeed as a company is vital and depends heavily on this assumption. The global coffee retailer is always conscious of cultural values and always does extensive research on economic and social trends before expanding into a new market. For Starbucks to be able offer their higher priced coffee there is a need for a stable economic climate. Furthermore, as the global price of coffee beans change, this may also affect the overall pricing and structure of the business. The importance of a quality product is crucial for Starbucks to maintain its great global reputation.


Prime and Strategic Locations

Since the formation of the company, Starbucks was quickly growing and developed a long list of retail presence around the world. In the same time, based on their advanced location strategy, much of the premium locations were involved by their retail locations. The area vital for retail location turned into another principle asset and the assets to keep growing, or possibly keep up a leading and prime position in the café market.


Starbucks has always been known for its employees. They are the primary resources of the organization and they are given incredible advantages like investment opportunities, retirement accounts and a healthy work culture. In this manner, the successful administration of its HR resource into extraordinary customer service. Their stores are community friendly, by reusing and decreasing waste, in this manner building goodwill among communities where they run their stores.

Spotting Opportunities

Starbucks is a great case of spotting opportunities and making viable usage of the same. Their way of life is subsequently that it can adjust to any environment which has helped them growing in such a variety of business sectors around the world. Efficient administration of their human capital and their suppliers, their foray into technology and their customer relationship management has guaranteed that Starbucks arrives to play a long innings in the café fragment.



Dunkin Brands Group was founded on November 22, 2005 and is headquartered in Canton, MA.Dunkin Brand Group Inc. run the business as a franchisor of quick service restaurants which is into serving baked food products and serving hot and cold coffee. It is also into serving hard serve ice cream.Dunkin group operates its business through four business sub-segments namely, Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins International and Baskin-Robbins U.S.Dunkin operates franchise restaurants under Dunkin’ Donuts and Baskin-Robbins brands. Dunkin’ Donuts serves coffee, muffins, donuts, bagels and sandwiches while Baskin-Robbins serves soft serve ice cream, frozen yogurt, hard-serve ice cream, shakes, malts and floats.http://vignette4.wikia.nocookie.net/logopedia/images/6/60/Dunkin'_Donuts_2002.png/revision/latest?cb=20100404125603

Dunkin Group went public in 2011 6:

· Added nearly 2,500 stores globally

· Revenues grew by more than 25 percent

· Operating income increased by more than 50 percent

· Returned nearly $860 million to shareholders

What’s Different

· The launch of the DD Perks loyalty program, which was a huge success for the brand with number of members went beyond the expectations in the first year.

· Significant progress included international businesses, demonstrated by new international development agreements in Sweden, Austria, and China.

· Dunkin continue to implement a sustainability plan and it’s work to find a more environmentally friendly alternative to Dunkin’ Donuts foam cup is just one example of the efforts the brand have underway to be an even more responsible retailer.


McDonald’s works and franchises McDonald’s eateries, which serve a locally-important menu of value nourishment and beverages sold at different reasonable value focusing in more than 100 nations.Today, McDonald’s Corporation has developed to more than 36,258 eateries in more than 119 nations serving an astounding 50 million individuals a day by and large.http://vignette2.wikia.nocookie.net/logopedia/images/4/4e/McDonald's_logo_2014.png/revision/latest?cb=20140617090639

According to a report the restaurant industry was composed of approximately 17 million outlets and generated $2.3tn in annual sales in 2013. McDonalds Systemwide restaurant business accounted for 0.2% of those outlets and 3.8% of the sales 7.

· No. of restaurants: 36,258

· Presence: 119 countries

· Employees: 420,000

· Franchisees: 29,544

What’s Different 8:

· McDonald’s arrangements to take off a few items from its menu to streamline benefit and refocus on its center things in the trusts of reinvigorating its sales in the U.S.

· The company has selected to center rather on its long time lead Big Mac and Quarter Pounder burgers, with showcasing effort that appear to talk more to its current steadfast clients and less toward wellbeing cognizant millennials.


Appendix 12

AmericasAs a% of Total Americas StoresCAPAs a % of Total CAP StoresEMEAAs a % of Total EMEA StoresAll Other SegmentsAs a% of Total All Other Segments StoresTotalAs a% of Total Stores
Company-operated stores8,67159 %2,45245 %73731 %37590 %12,23553 %
Licensed stores6,13241 %3,01055 %1,62569 %4110 %10,80847 %

Table 12

Appendix 2 3

Sep 27, 2015(52 Wks)Sep 28, 2014(52 Wks)Sep 29, 2013(52 Wks)Sep 30, 2012(52 Wks)Oct 2, 2011(52 Wks)
Net revenues
Company-operated stores$ 15,197.3$ 12,977.9$ 11,793.2$ 10,534.5$ 9,632.4
Licensed stores1,861.91,588.61,360.51,210.31,007.5
CPG, foodservice and other2,103.51,881.31,713.11,532.01,060.5
Total net revenues$ 19,162.7$ 16,447.8$ 14,866.8$ 13,276.8$ 11,700.4

Table 2 3

Appendix 3 7

Major Players(market share)
Starbucks Corp. 42.4%Dunkin 25.5%Others 32.1%

Appendix 4 1

Fiscal Year EndedSep 27, 2015Sep 28, 2014Sep 29, 2013
Beverage$ 11,115.458%$ 9,458.458%$ 8,674.758%
Packaged and single-serve coffees and tea$2,619.914%$2,370.014%$2,206.515%

Table 3 1


1 Starbucks’ 2015 10-K Annual Report

2 Forbes article by Sarah Miller Caldicott

3 GlobalData

4 IBISWorld, 2014

5 IBIS World Report 72221b Coffee & Snack Shops in the US, 2014

6 Dunkin Annual Report 2014

7 McDonald’s Annual Report 2014

8 The Daily Meal, Article by Nevin Barich

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