STRATEGIC PLANNING ANALYSIS: STARBUCKS

Prayoga Cahayanda

SMAK04

INTRODUCTION

Starbucks is the largest coffee shop network in the world. There have been many Starbucks stores are popping up all over Indonesia. Currently in Indonesia there are 147 stores spread across 12 cities. Starbucks as a coffee shop, is not only provides high-quality coffee but also creates a different experience for the customer and as a prestigious place to work .

Starbucks originated from the United States and is headquartered in Seattle, Washington. The first Starbucks store opened on March 30, 1971 by three partners : an English teacher, Jerry Baldwin, Zev Siegl, a history teacher, and a writer Gordon Bowker . The three were inspired by coffee roasting entrepreneur Alfred Peet, which they know personally, to sell high-quality coffee beans and their equipment. Since its founding as a toaster and coffee beans local retailer, Starbucks expanded rapidly. In 1990, Starbucks opened a new store every workday, a phase which continued until the 2000s

VALUE CHAIN ANALYSISStarbucks value chain system

creates added value to its products, which make

customers willing to pay more. Therefore, the company does

not hesitate to set prices above market for its products. In fact, customers come to Starbucks coffee and do not look at the price but they are looking for quality products and brand

image that the company offers. This happen because their

value activities were effective in the coordination between its

primary and secondary activities, resulting in the creation of added value to

Starbucks brand and products

VALUE CHAIN ANALYSIS

Its inbound and outbound logistics activities, operations, marketing and service activities are supported with a good corporate management planning, human resource management, technological development, and procurement activities. For example, the setting up of stores is well planned. Each location is carefully studied, taking consideration and seemingly irrelevant details such as traffic flow, density of people and demographic characteristics of an area, and careful selection of personnel to be deployed in each outlet. These are done to support the primary activities that aim to deliver good quality coffee products to consumers. In the primary activity component, suppliers are cautiously selected, the distribution of coffee beans to each outlet is carefully planned to maintain freshness, and each store are designed to exude an ambience of luxury and comfort for its consumers. This is the cause that Starbucks become the company a leader in the coffee industry for last two decades.

SWOT ANALYSIS

SWOT analysis is the instrument used to perform strategic analysis . According to Freddy Rangkuti ( 2004 ), SWOT analysis is the identification of various factors systematically to formulate corporate strategy. This analysis is based on the logic that maximizes strength (Strength) and opportunities (Opportunities), but at the same time can also minimize weakness (Weakness) and threats (Threats).

STRENGHTS

Convenience

Quality

Ethics

Location

Brand Identit

y

Starbucks

experience

Variation

WEAKNESS

Weakness

Exclusiveness

Too many products

Risky Investme

nt

OPPORTUNITIES

Expansion of the retail

operation

Enhance product offerings

Expansion to developing countries

Expansion of suppliers network

Opportunities

THREATSThe increase in raw material prices

The increase in raw material prices

Increased Competition Increased Competition

Threats

Disruption of suppliesDisruption of supplies

MATRIX ANALYSIS OF INTERNAL AND EXTERNAL FACTOR EVALUATION

According to David (2006), IFE and EFE Matrix aims to analyze environmental factors, either

internal and external. Internal factors are classified into strengths and weaknesses of the

company and analyzed with matrix IFE . External factors classified into opportunities and

threats for the company and analyzed with the EFE matrix. Stages in the manufacture of IFE

matrix and EFE , are as follows :

a. Factors specified in column 1 for external strategies are opportunities and threats and internal

strategies are the strengths and weaknesses of the company

b. Give weight to each factor in column 2, from 0.0 (not important) to 1.0 (most im portant). The

sum of all weights given to all the factors must be equal to 1.0

c. Give rank 1-4 in the third column for each key factor, for determine the effectiveness of the

company's strategy in response to these factors, by making a scale ranging from 4 (excellent )

to 1 (below the average )

d. Multiply each weight by its rating to determine the factors weighted value

e. Sum the weighted value of each variable to determine the total weighted value for the

company

MATRIX ANALYSIS OF INTERNAL FACTOR EVALUATION

Strategic Factor Weight Rating Score

Strenghts

1.Brand Identity

2. Quality

3. Variation

4. Location

5. Convenience

6. Starbucks experience

7. Ethics

Weakness

1. Exclusiveness

2. Too many products

3. Risky Investment

Total

 

0.2

0.1

0.1

0.1

0.2

0.05

0.05

 

0.1

0.05

0.05

1

 

4

4

3

4

3

3

3

 

3

3

2

 

0.8

0.4

0.3

0.4

0.6

0.15

0.15

 

0.3

0.15

0.1

3.35

Strategic Factor Weight Rating Score

Opportunities

1. Expansion of suppliers network

2. Expansion into developing countries

3. Enhance product offerings

4. Expansion of the retail operation

Threats

1. The increase in raw material prices

2. Increased Competition

3. Disruption of supplies

Total

 

0.2

0.15

0.1

0.1

 

0.2

0.15

0.1

1

 

3

4

3

4

 

2

3

2

 

 

0.6

0.6

0.3

0.4

 

0.4

0.45

0.2

2.95

MATRIX ANALYSIS OF EXTERNAL FACTOR EVALUATION

MATRIX ANALYSIS OF INTERNAL EXTERNAL

Values that obtained from the IFE and EFE matrix is inserted to IE Matrix for mapping the position of the company at the current time. The Total Weight of IFE scores will be put on the x-axis and the total weight of EFE scores will be put on the y-axis. IE Matrix divided into three major parts that have different strategy implications , namely :1. Growth and Build division (I, II , or

IV)2. Hold and Maintain division ( III, V or

VII).3. Harvest or Divest division (VI, VIII or

IX)

MATRIX ANALYSIS OF INTERNAL EXTERNAL

SWOT Matrix Analysis IFE      EFE

(Strength/S) Brand Identity Quality Variation Location Convenience Starbucks experience Ethics

(Weaknesess/W) Exclusiveness Too many products High-risk investment

(Opportunities/O) Expansion of

suppliers Network Expansion into

developing countries

Enhance product offerings

Expansion of the retail operation

S-O Strategy With an already strong trademark, Starbucks is

supposed to look for a new supplier networks, especially in the Asia region (SO1)

Expansion of Starbucks instant products to supermarkets that spread across the world (SO2)

W-O Strategy 

To avoid risky investments in the U.S., Starbucks should try to expand its market to developing countries (WO1)

(Threats/T) The increase in the

price of coffee beans and dairy products

Increased competition from local cafes and other coffee shops

Disruption of supplies

S-T Strategy One of the major threats facing Starbucks is from the

competitors. To encounter that, Starbucks had to innovate and diversify their product more often to maintain its position in the market. (ST1)

Due to political or economic instability in some countries may affect business operations. But with a strong global image, Starbucks can shift its operations elsewhere that have potential growth. (ST2)

W-T Strategy  To avoid competition from local

cafes and of the risk of investing in the domestic, Starbucks is supposed to expand to other countries that have less competition and less risk (WT1)

ANALYTICAL NETWORK PROCESS

Pairwise Comparison is used for obtaining data which identify the weight for Analytical Network Process. The scale used to indicate :

• 1 = if external or internal factors on horizontal part are less important than the strategic factors external and internal on vertical part

• 2 = if external or internal factors on horizontal part are equally important than the strategic factors external and internal on vertical part

• 3 = if external or internal factors on horizontal part are more important than the strategic factors external and internal on vertical part

ANALYTICAL NETWORK PROCESS

Strategy Alternatives Weight

1. Innovation and product diversification

2. Network supplier of new raw materials

3. Expansion to developing countries

4. Sales of instant products to supermarkets

5. Expansion to country with smaller competition and

risk

6. Divert operations to a stable country

Total

0.208

0.194

0.167

0.153

0.153

0.125

1

CONCLUSION

The right strategy for Starbucks is the penetration and market development strategy and product development strategy. The most prioritized strategy is to make better innovation and product diversification in all product of Starbucks

Key to the success of Starbucks is that they produce a quality product that is far superior than their competitors, while continuing to offer a variety of products that separate them from the competition. They understand that customers place a value on the image when drinking coffee at Starbucks, and are willing to pay a higher price for the image

SUGGESTION

Conducting surveys within the Starbucks organization in order to further explore the strategies employed directly by the company

Conducting research using other analysis such as Porter's five forces analysis, PEST analysis, Pestel analysis

Prayoga Cahayanda