A Macro Environment: The External Environment Of Starbucks

Contents

1. INTRODUCTION

1.1 Who they are? 2

1.2 What they do? 2

2. EXTERNAL ENVIRONMENT

2.1 Macro Environment 2

2.1 Micro Environment 3

3. ISSUE ANALYSIS 5

4. CONCLUSION AND RECOMMENDATIONS 6

5. REFERENCES 7

1. INTRODUCTION

1.1 Who they are?

Starbucks Coffee is an international coffee company and coffeehouse chain owned by an American business, Starbucks Corporation. They are world’s largest coffeehouse company specialising in serving high quality coffee and beverages.

Starbucks Coffee was first opened in 1971 in Seattle by co-founders Jerry Baldwin, Zev Siegl and Gordon Bowker. They

Direct competitors such as Costa Coffee and Cafe Nero compete on a much more of a parallel with Starbucks compared to the fast food chains, as they attract the same consumer base and offer similar products as in the way Starbucks does.Starbucks differentiates itself from other coffeehouse as it reaps higher margins from its specialty drinks. This is because it takes advantage of economies of scale and has a different cost structure in contrast with other competitors in the market. They pay less for the products bought in bulk, such as dairy goods, syrups, paper goods.

New Entrants

For new entrants, the initial investment is not as significant as they would usually start small. Leasing stores and equipment does not require a big sum of money thus, small coffeehouses are able to easily compete with the likes of bigger coffeehouses in terms of cost for the consumers.

However, the industry can be very competitive especially when facing with large incumbent brands identities like Starbucks who have achieved great economic scale by lowering cost, improved efficiency with a huge market share. Furthermore, large brand identities coffeehouses like Starbucks often has the upper hand in establishing high quality product, prime real estate locations, their store’s experience, relationship/sponsorship opportunities. These advantages Starbucks and other bigger

However, the availability of the variety is not much of a concern as their next main focus is their specialty tea. In 2013, they have initiated the sales of tea to be their direct substitute product under its own Tazo Tea brand.

Direct competitors such as Cafe Nero and Costa Coffee can be a threat to them when consumers starts to substitute them to Starbucks. These direct competitors are hard to ignore as they pride themselves on customer services and the quality of their specialty drinks.

In conclusion, we can tell that the coffee industry today is by far one of the more attractive and yet highly competitive industry. Many SMEs(Small and Medium Enterprises) these days can be found venturing in the coffee business which led to less bargaining power for both buyers and suppliers. Thus, the rate of profits are usually more concentrated upon the bigger firms like Starbucks. Even so, Starbucks still continues facing potential threats from new capable entrants.

3. ISSUE