II.

Situation Analysis
A. General Environment Analysis
Businesses generally operate in a network and are not entirely independent
because of the several environments that influence their activities and
actions (Zhu, 2010)
Examples of factors both from the internal and external (micro and macro)
environment that could influence Starbucks includes; competitors, customers,
suppliers, financiers; political, economical, social, technological, environment,
and legislation.
PESTEL ANALYSIS
The following PESTEL analysis will aim to extensively evaluate Starbucks and
understand how the Political, Economical, Social Technological Environmental
and Legal issues will impact the company External environment since it
relatively has minimal control over such factors.
POLITICAL INFLUENCES
Tariffs and International Trade regulations: Countries belong to trading blocks
such as APEC, G20 and most importantly CAIRNS GROUP for agriculture
(news.bbc.co.uk), where the main aim is to reduce the effects of tariffs.
However Global companies such as Starbucks are still affected because it
operates across borders and is in over 50 countries therefore high tariffs
might mean that Starbucks reputation and ability for sourcing the best coffee
beans; which involves importing from different countries could be
compromised, subsequently affecting its global sales and competitiveness.
Government stability:
Political stability of countries is an important issue that firms need to consider
because other indicators may point to a country as being investor friendly,
however that could rapidly change when there is elections or political
instability.
ECONOMICAL INFLUENCE
Exchange Rates:
The falling dollar rates compared to other currencies (Bloomberg.com) which
was caused partly by weaker monetary policy will affect imports. Most of
Starbucks vital supplies such as coffee beans, sugar and milk will be affected
because they are imported, thus incurring higher cost due to weak dollar. This

raises a question as to whether the company will pass the extra cost to
consumer and risk making its coffee even more expensive.
Income Distribution:
After the economic crises of 2007 that led to job losses, unemployment
figures rose (to 2.5million in Britain 2010 Office for National Statistics). This
affected income disparity which became unequal. Hence people that were
previously able to afford Starbucks expensive specialty coffee now saw it as
a luxury thus leading to low sales in some locations. This in effect affects the
companys expansion plan. In this case Economic Influences has an
unfavourable impact.
SOCIAL INFLUENCES
Changing Tastes:
The changing taste in Japan indicates that people are consuming more
specialty coffee since Japan is the worlds third largest coffee consumer. This
influences Starbucks because it provides an opportunity to exploit this market
and gain higher market share in the coffee market .In Japan, they focus on
speed of service and quick turnover of customers because they prefer the
instant coffee so Starbucks might have to alter its strategy there. This will not
be too difficult taking into account the trend of Americanisation and its
success across developing countries.
TECHNOLOGICAL INFLUENCE
Wave of Technological trends:
Technological advancements have never been so fast, hence firms need to
consistently follow the trends and exploit any opportunities that may result
and implement any change required. For example, Starbucks have embraced
the new phone payments system that was introduced recently which helps
cut long queues at peak times. Social network memberships is growing by the
millions e.g. facebook has over 500 million users and users have an average
of 130 friends, additionally, time spent on the site is over700 billion minutes
a month (facebook.com). Exploiting this trend offers companies such as
Starbucks a platform to relate and share ideas with customers. It has already
used social networking sites such as facebook (with over 19 million friends)
and a forum which it runs, to communicate and engage with customers and
communities (Economist.com).Technology has a favourable impact for
Starbucks.
Environmental Influences
Environmental pressure groups:Non Governmental Organisations and
pressure groups possess incredible ability to coerce businesses into changing

their practices. They could influence businesses through lobbying and

boycotts. Such measures usually impact the intangible assets of a firm which
usually involves tarnishing a companys brand name. Starbucks however
works with theFair-Trade movement (Economist.com) and the accreditation
that comes with suchalliance massively improved Starbucks image, hence
Environmental influences is favourable for Starbucks.
LEGAL INFLUENCES
Not all countries welcome big firms because they like to protect their
indigenous firms from unfair competition and takeover. Legal issues such as
Monopoly and national protectionist laws
will affect Starbucks because of its size and its plan of expansion. Just like in
Japan, Starbucks is facing difficulties because of culture acceptance in Japan.
In summary, the PESTEL analysis found that External influences was
altogether balanced since Sociological, Technological and Environmental
factors were favourable, while the other factors such as Political,
Environmental and Legal factors still pose a valid threat.
B. Industry Analysis
EXHIBIT 6: Japan Consumer Preferences
1980
1985
1990
Instant Coffee
57.6
59.2
50.6%
%
%
Regular Coffee
33.3
29.4
33.1%
%
%
Canned Coffee
9.1%
11.4
13.1%
%
Total (Cups per
7.4
9.00
9.52
week)
Place of
Consumption
Home
Coffee Shop
Work/School
Other

55.8
%
24.6
%
15.4
%
4.2%

C. Competitive Environment

58.3
%
11.6
%
21.8
%
8.3%

1994
45.4%
37.4%
17.3%
10.36

56.6%

54.7

8.9%

8.0%

23.9%

26.4%

10.6%

10.9%

Japan is the worlds third largest coffee consumer in the world. According
to the latest government survey available, in 1992, there were 115,1432
coffee shops in Japan.
Japans coffee culture revolves around the kissaten, a relatively formal sitdown coffee house. According to the All Japan Coffee Association, while
U.S and German consumers consumed 18.1 and 10 million bags,
respectively, of coffee in 1994, the Japanese consumed 6.1 million coffee
bags. (1 bag=60kg)
Doutor Coffee Company and Pronto Corp. are two of Japans wellestablished coffee chains. Dotour coffee Company started in 1980 and it is
the leading coffee bar that time with 466 shops in and around Tokyo. Its
seating is limited and counters are provided where consumers can stand
while they consume their beverages. The focus is on speed on service and
quick turnover of customers. It is about 10 minutes average time
customer can stay in Dotour Coffee Company. A standard cup of coffee at
Dotour costs 180 yen.
Pronto Corp. is Japans second largest coffee bar chain in Japan in 1987. It
operated over 95 outlets, most of them in Tokyo. What makes them
unique is that they can shift on day time that offers coffee and light snack
and night time as neighborhood bar type. At Pronto, a standard cup of
coffee cost 160 yen.
D. Internal Analysis
COMPANY CULTURE:
Diversity and Inclusion

Build a diverse workforce

Increase cultural competencies
Share a culture of inclusion
Develop a diverse network of suppliers
Our Partners
We offer finest coffees in the world, grown, prepared and served by
the finest people. Our employees, who we call partners, are at the
heart of Starbucks Experience.
We believe in treating our partners with respect and dignity. We are
proud to offer two landmark programs for our partners:
comprehensive health coverage for eligible full and part time
partners and equity in the company through Bean Stock.

RESOURCES AND CAPABILITIES:

Tangible:
Store Design
Distribution Centers
Well-Trained Employees
Intangible:
Information Technology
Brand and Reputation
Training Programs
Partnerships
Coffee Suppliers
Culture