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    Internal and external environmental factors influencing business activities

    University: BPP UNIVERSITY SCHOOL OF BUSINESS AND TECHNOLOGY

    • Unit No: 4
    • Level: Undergraduate/College
    • Pages: 17 / Words 4363
    • Paper Type: Assignment
    • Course Code: PN1N3
    • Downloads: 327
    Question :

    This assessment will cover the following questions:

    • A detail evaluation of the sources of Starbucks competitive advantage (internal analysis) and how these differ from Starbucks competitors
    • Starbucks is the coffee house chain. Explain Starbucks and its competitive position relative to the other companies.
    • A critical analysis of the Speciality Coffee Café Industry and on the Starbucks performance in the past 3 years.
    Answer :

    INTRODUCTION

    From the case study of Starbucks it has been concluded that in order to remain in the competitive world it is essential to compete with rivalry. Firm need to frame strong tactics to over the challenges created by competitors (Atzori and Murphy, 2018). Costa Coffee, Caribou Coffee, Cafe Coffee day etc. are some of competitors of Starbucks. This report is based on Starbucks. This assignment covers internal and external environment factors which are influencing their business activities. Along with it meaningful recommendation is suggested to the CEO of Starbucks so that performance can be raised over three years. 

    PART 1

    Main Body

    Introduction to Starbucks and it's Competitors

    The annual revenue of Starbucks is $16 million and around 2,00,00 skilled workers are working day and night to meet the set goals and objectives. Business is expanded in over 60 countries are able to meet the emerging taste of the customers successfully. From the case study it has been found that around 21,000 Starbucks branded cafes are there in the where potential customers can visit and can enjoy the taste of the coffee. But in the year 2008 and 2009 around 900 stores are closed down because of the rapid decline in the consumption of the coffee. Due to which profit margin reduced to a large extent in the global market. Management of the organisation decided to regain their position in the market by diversifying their products in the global market. Starbucks entered into other segments where new innovative products will be able to create value in the global market. By this organization will be able to capture huge market ratio (Cachia, 2017).

    Starbucks is serving it's services across the globe and large customer base has been build over the years. Due to which organization is surrounded by many competitors prevailing in the competitive world. Some of the rivalry who are creating tough challenges for Starbucks are, Dunkin' Donuts, McDonald's, Costa Coffee, Caribou Coffee, Cafe Coffee day and many more. 51.22 is the outstanding sales of Dukin and has 11,000 stores across the globe. Whereas, McDonald's has 36000 stores and 420, 000 employees are working day and night to meet the desire standards. It has been examined from the case study that as compare to Starbucks Costa Coffee is more demanded in UK.

    Explain the external environment (5 Force Analysis, PESTEL, Industry Life Cycle Model)

    PESTEL analysis is conducted by Coffee day Industry in order to better understand the external environment forces prevailing in the global market. By understanding political, social, economical, Technological factor and so on industry can easily flourish without government interference (Campbell and Helleloid, 2016). The PESTEL analysis of Coffee day Industry are highlighted as under:

    Political factor: Coffee day Industry is greatly affected by political factor. Trade restrictions, environmental law, tariffs so on are some of the examples of political factor. In order to over the political factor policies are framed by Coffee day industry so that best outcomes can be attained. 

    Advantages:

    • By facing issues related to political factor Coffee day industry can flourish smoothly in the global market.
    • Political factor makes the industry stronger and flexible in nature so that they can cope up easily with political instability in the coming years.

    Dis-advantages:

    • Coffee day industry does not invest more in understanding political factor due to which heavy financial losses are beard by them.
    • The growth of the industry come on stake if political conditions are not determined.

    Economical factor: It is important to understand economic factor by Coffee Day Industry in order to gain competitive advantages in the open market place (Deligöz and Ünal, 2017). Tax rates, interest rates, wages, policies and many more are examples of economical factor.

    Advantages:

    • Research and development work can be performed smoothly by Coffey Day Industry by evaluating economic factor.
    • This helps in enhancing public services in positive manner which directly assist in uplifting in the living standards of the people.

    Dis-advantages:

    • In Coffee Day industry unproductive results are attained by ignoring economic factor.
    • By not focusing on economic factor in Coffee day industry more unemployment ratio will be raised at a tremendous scale.

    Social factor: Market value can be raised of the Coffee Day Industry by full-filling the social requirement on priority level. Some of the examples of social factor are customs, traditions, norms, beliefs and so on.

    Advantages:

    • Industry focusing on social factor indirectly raises better learning opportunities for their employees (Harrington and Fauser, 2017)
    • More capable and talented workers are hired in the industry by analysing the social factor

    Dis-advantages:

    • Industry focusing more on meeting social need affect their customer base because their demand are not up-to their expectation level.
    • Coffee Day Industry is influenced greatly by the personal income of the consumers.

    Technological factor: To be in the top position Coffee Day Industry adopts modern technology. By this quarrier of the customers can be resolved easily and better goods and services can be offered to the end users. 3D technology is used by this industry to bind potential customers longer time duration.

    Advantages:

    • More customer base for the goods and services raises by execution of advanced technology.
    • The industry is growing at a rapid scale because of adoption of high tech information technology .

    Dis-advantages:

    • Profit margin of the industry decreases because finance is invested in implementation of modern plant and machinery.
    • High tech tool and their uses in the Coffee Day industry are balancing their ethics.

    Environmental factor: Industry is working more on environmental factor in order to save the atmosphere from depletion. Many eco-friendly ways are used by Coffee Day Industry to survive in the competitive world over the years. Ignoring environmental factor leads to cancellation of licence from operating.

    Advantages:

    • The sales ratio of the goods and services raises in the Coffee Day Industry because customers are think that company is conscious for environment.
    • Bank offer sufficient amount of finance to Coffee Day Industry because they are working to environmental issues in better way.

    Dis-advantages:

    • Sufficient time and money is required by Coffee Day Industry to work on environment factor (Hossain and Islam, 2015).
    • Experts are hired in order to train workers regarding how to use and recycle the resources in best way. Due to which working criteria slows down for some time span.

    Legal factor: Large number of customer base can be raised by assuring the customers that Coffee Day industry is conducting legal activities. According to the nation legal factor are adopted so that smoothly business can be operated without government interference. By this loyal client can be build over the years.

    Advantages:

    • Coffee Day industry liability is limited to large extent.
    • By adopting legal factor industry can operate smoothly without government interference.

    Dis-advantages:

    • Goodwill falls down when legal laws are not followed properly by the industry.
    • Survival of the industry comes to an end if illegal work are conducted by Coffee Day Industry

    5 Force Analysis:

    Porter's five force analysis widely adopted by company so as to determine competition of a business. Coffee Day industry conduct this in order to better understand the market condition and accordingly plan strategies to be in the leading position. The five forces created by M. Porters in the year 1979 are elaborated as follows:

    Competition in the industry: In order to succeed in the international market competitors compete with each other aggressively. In order to capture huge market ratio tough bench mark is formulated by Starbucks for their rivalry in the open market place (Jo and Kim, 2017). The power is more or high when:

    • When the exit barriers are intense
    • Growth of the industry is very less
    • Rivalry are of same standards
    • Similar goods present in the market and does not have any major differences in themselves.
    • Substitutes are easily available in the market
    • Abundance number of competitors prevailing in the market

    Potential of new entrants into the industry: The threat come big in the international market when organisation does not have sufficient funds to enter into the market. Those organization who are monetary stable in nature tend to face less barriers in the open market place at the time of entry. Starbucks is financially strong they face less challenges while entering into new market. The degree of power is more in some conditions which are stated as under:

    • When there is no specified government regulations
    • Goods are mostly similar in nature with common features and characteristics.
    • Switching rate of customers are low
    • Less customer loyalty
    • Present companies does not posses trademark, patent right or do not have ay brand reputation in the global market (Kang and Namkung, 2018).

    Power of suppliers: In the global market bargaining power of suppliers are high then are able to sell less quality goods and services at high price to the customers. Here, customers exploitation is done more and power lies in the hands of the suppliers. Starbucks faces lot of problem when the power is in the hands of suppliers. It mainly take place in monopoly market. The degree of power is more in the hands of suppliers in certain conditions which are explained as under:

    • When the cost of shifting raw material is more
    • Scare resources are there with suppliers
    • Less substitute raw materiel exist
    • large number of buyers present in the market but limited suppliers available

    Power of customers: When the degree of power is high in the hands of the buyer or customers then they has capabilities to lower the process of the goods and services of Starbucks in the global market (.Koapaha and Tumiwa, 2016) . Buyers can seek high quality products at low cost when bargaining power is strong. By this suppliers are affected more as higher quality goods raises the production cost and they are unable to maximize huge profit from the selling. In some condition bargaining power of buyer's are strong that are showcased beneath:

    • Too many alternate option are available in the market.
    • When end users are more price delicate
    • Switching ratio to other suppliers is less
    • Buying in bulk quantities

    Threat of substitute products: It is another aspect of Porter's Five Force Model which is more threatening to the organization when buyers has abundance substitute goods present in the market. Along with this the switching rate of customers from Starbucks raises when competitor is offering high quality goods and services in less price. Here, customers are not loyal they keep on shifting if slight changes occur in prices, quality and so on. This indirectly raises competition in the market.

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    Discuss internal environment (Value Chain Model, VRIO model, Capabilities and Competencies)

    Internal environment of organisation

    In the present scenario, most of the current organisation are performing their work at global level. This determines it is mandatory for Starbucks to perform their work according to the existing strength and weaknesses of organisation. Therefore, with the implement of VRIO analysis it is easy for management to formulate effective and long term strategies for organisation (Lee, 2017). The main motive to analyse the internal environment is to understand strength of management so it is easy for organisation to deal with the issue that are impacting on business's and its performance. It results the sale of Starbucks products will increased with the help of effective strategy due to which it is organisation will able to achieve their objectives in specified time period. Therefore, VRIO model in context of Starbucks is mention as follow:

    Valuable- According to value perspective, it is analysed that Starbucks are performing their work with more efficiency through providing better and high quality products to its customer's. The main motive of them is to increase their market share as well as to gain long term benefits by offering better products to consumers. Goodwill of organisation is an essential part for the management of Starbucks because it helps management to sale their products and services at premium price. Example- Starbucks is selling their products at high prices as compare to its competitors because of its better brand recognition. 

    Majority of the existing organisation in food industry are performing their work at global level. Therefore, it is mandatory for management to adopt those tools that enhances business's performance at global level. In context of Starbucks, management is more focused towards implement of better supply chain because it helps to deliver products with quick approach. On other side, quality of Starbucks products is also high so it leads management to gain better results in existing market conditions.

    Resources- Their are large number of resources are required for the Starbucks to perform their work at global level. This governs that it is mandatory for management to arrange and organised all resources in effective manner due to which Starbucks is able to perform their work in effective manner. On the other side, all raw-materials which are used by Starbucks are high in quality (Logan, 2016). This results it is easy for organisation to provide better products to its customer's. Goodwill of organisation is a rare perspective for organisation that is used to enhance long term benefits. It is also monitored that customer services such as quick delivery of products also works as one of the rare perspective for organisation. In the last, investment decision of authority also work as positive aspect by performing their work on valuable and rare basis.

    Imitability- All of major resources that is used by management of Starbucks are too costly that is used to make better products for customer's. It also determines that most of the product that are provided by management are valuable as well as rare. Due to this it is easy for organisation to achieve better sustainability in market through formulating competitive edge in market with better goodwill and brand image.

    Similarly on the other side, as the management increases sustainability in market it is easy for them to complete work in proper manner. This is also used to gain long term results as well as to perform their work as per quality of products it also helps the management to increase their sales and revenues by capturing more market share.

    Organisation- Starbucks is performing their work at global level so they offer several products to satisfy the needs of customer's in effective manner. From the perspective of Starbucks it is mandatory for management to accomplish their objectives in effective manner with the understand of VRIO framework. Along with this the main aim of Starbucks is to enhance their goodwill as well as supply chain to formulate positive working environment in organisation.

    Value chain analysis- This is mandatory for organisation to perform its work according to global standards . It is also divided into several categories that is used to accomplish organisational task in appropriate manner. Value chain analysis leads organisation for completing their primary activities by utilising physical conception of its products (Shiau, 2016). Along with this secondary activities is also achieved to complete the work according to infrastructure and strategy of organisation. Like human resources, technology and strategies leads management to gain top position in market.

    Resources- Starbucks offers wide range of products to its customer's that are tangible. Similarly, intangible services is also used by management for completing their work as per needs of consumers. Like, Starbucks offer their products with the client name on their glass. Its results this it is mandatory for management to perform the work in effective manner. On the other side, retail organisation is offering various products to its customer's due to which whole work will be accomplished with the motive of gaining competitive edge in market. It also governs that with implement of new and better technology it is easy to increase profits for firm by satisfying needs of customer's.

    Capabilities- Starbucks is one of the major organisation that offers and deliver coffee and its products to more number of customer's for increasing their market size. High quality products and goodwill of Starbucks are the pillars which helps to increase market area. Moreover, by covering more market area number of customer's will also increased that is used to earn better revenue (Shirdastian and Richard, 2017).

    Competency Framework

    Competency framework demonstrate better infrastructure which is used to develop better knowledge and skills among employee's. The main motive of competency framework is to increase productivity of employee's.

    Leadership development- It includes that all action, operations, activities etc. are essential part of organisation which is increasing market knowledge of employee's by organising seminars and workshops of employee's.

    High potential talent- Most of the existing employee's of Starbucks learned better skills as well as gain more experience by learning all aspects of management on constant basis. It determines that most of the operations of Starbucks are performed according to market needs and customer's expectation. 

    Recruitment and selection- All the roles of Starbucks are separate from each other as they are divide according to skills and capabilities of employee's. Therefore, it is easy for organisation to identify right candidate as per their skills and capabilities. It results the recruitment process will be improved of Starbucks.

    Performance management- Starbucks provides high quality products to its customer's. Along with this they are performing their work at global level so it mandatory for management to make and offer equal quality of products at their stores. Therefore, it is essential to perform the work as per benchmarks standards (Sisson and Bowen, 2017)

    Rewards and recognition- In order to get better results it is mandatory for Starbucks to encourage their employee's due to which better work performance will be gained. The main motivate of employee's is to increase morale of employee's. This results management is able to perform their work with high quality. 

    Recommendations for next 3 years.

    Across the globe Starbucks Coffee is offered to the customers. In order to serve best services to the potential customers Starbucks work on their taste and preferences by examining their feedbacks and review of the coffee. Starbucks is expanding their business in developing nation in order to raise their customer base for the goods and services offered by them. By this huge market ratio can be captured and the designed objectives can be accomplished by the company easily. The SMART objectives designed by management of Starbucks are illustrated as under:

    Specific: Starbucks has attained annul sales growth by 26% in the 22 years.

    Measurable: The sales ratio shot up to 84% in the global market

    Achievable: Starbucks objectives is to earn good profit by serving high quality product and services to the potential customers. It has been achieved over the years.

    Relevant: By 2000 Starbucks was to take $2 billion in revenue.

    Time-bound: In the competitive market place due to time bound short term objectives are set which can be attained in three months or six months according to the dynamic environment condition (Taecharungroj, 2017). 

    In the era of modern technology where are resources are utilized in optimum level despite of that fact Starbucks need to frame strong and unique strategies so as to examine the required resources for the organization. Some of the tactics are formulated by Starbucks which are elaborated as under:

    Growth strategy: Starbucks impose strict rules and regulations in order to accomplish the firm's activities smoothly. By studying the market condition it came to known that by serving quality coffee to the targeted customers huge revenue can be maximized. Growth strategy aid firm to compete with their rivalry prevailing in the open market place.

    Demographic segment: In order to be in the leading position Starbucks coffee is segmented accordingly. By this long term profit can be generated. Through demographic segment it is easy for the management to expand their business in the targeted market (Talhelm and Oishi, 2018).

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    PART 2

    Stakeholder report

    Internal and external stakeholders of Starbucks

    Stakeholders

    Internal or External

    Reasons for considering them

    Workers

    Internal

    Workers are considered as stakeholders in the organization because they are the most useful aspects which helps in meeting the emerging needs of the customers.

    Government

    External

    The reason behind considering it as stakeholders is that they design legislation and policies which are beneficial for business and support them to operate the firm smoothly.

    Shareholders

    Internal

    Shareholders are important stakeholders for the organisation because they directly or indirectly assist in raising the funds so that day to day business operations can be performed smoothly (Tikson, 2018).

    Suppliers

    External

    They are backbone of the business. Suppliers are considered as stakeholder because they assist in running the business activities effectively and efficiently.

    Customers

    External

    Customers play a vital role in the company. They are considered as stakeholder because through their support and help business in competitive world is able to gain huge revenue as compare to rivalry.

    Customers on priority of Starbucks among stakeholders group

    In the competitive world stakeholder play a significant role in a company. They influence the firm's day to day operation activities and decision making process to a large extent. Moreover, Starbucks customers are stated on top priority from the list of stakeholders. All the stakeholders associated with the organization are helping business to perform their activities smoothly and guide them to meet the emerging needs of the customers as soon as possible. From the case study it can be concluded that customers are treated as precious assets and train their employees to meet their expectation level (Voigt and Michl, 2017). Many sessions are conducted where customers taste, preferences, quarrier regarding quality and prices are addressed. The feedback and the review taken from the end users are taken in positive side and necessary improvements are done in order to bind customers emotionally with the product and its brand. Starbucks are offering discount and other schemes on festive session where middle-class customers can enjoy the Starbucks coffee.

    Power and interest of workers

    The above mentioned digram it can be concluded that customers holds high interest in an organization. By this sales ratio of the goods and services of Starbucks can be raised at a tremendous scale in the global market. Also, customers are highly satisfied. On the other hand power of customers are low so that prices of the goods can be set according to their desire. Organization can design the coffee according to the customers taste so that huge revenue can be maximized as compare to rivalry in the global market.

    CONCLUSION

    From the above discussion it can be summarized that there are distinguish competitors in the global market who creates tough challenges for the organization. In order to cope up with them in the international market it is very essential to conduct Pestle analysis in appropriate manner. Pestle (political, economical, social, technological,environmental and legal) analysis directly or indirectly assist company to cope with the external forces easily. By this competitive advantages can be gained against rivalry and business can be flourished smoothly without government interference. Porter's five force analyses is another way to identify the degree off power that competitive forces holds. In order to assess internal environment several models are used in the premises such as, VRIO , value chain and many more. All this guide management to work on the loop holes so as to attain productive results. Appropriate recommendation is suggested so that firm can enhance their performance over the next three years.

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