Strategic Risk Analysis of Starbucks

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Strategic Risk Analysis of Starbucks

Xiaochen Yang

ERMCPS5320

H. S. Bob Kostakopoulos, Ph.D.

Feb 26th, 2019

Executive Summary

        The primary goal of this research is to determine the overall strategy of Starbucks and identify key risks of development, execution, competition, and their potential impact on the business. It involves assessing possible risks in the internal and external environment, namely the most reasonable and dangerous, and developing mitigation strategies.

        The document uses such strategic tools as SWOT analysis to check internal risk factors, Porter's Five Forces to analyze the industry where the company operates, and the probability and impact matrix to determine the most dangerous threats. Besides, it reveals that Starbucks needs a strategy to mitigate the effects of identified risks that can reduce potential consequences. Thus, the recommendations show the need for an expansion strategy in the Chinese market, an increase in the distribution channels for products, and the creation of new products that largely correspond to consumer demand.

Table of Contents

Executive Summary        Error! Bookmark not defined.

Introduction        Error! Bookmark not defined.

Starbucks Overall Strategy         Error! Bookmark not defined.

Key Strategic Risks        5

        SWOT Analysis        5

          Porter’s Five Forces        7

        Probability and Impact Matrix        9

Mitigation Strategies        10

Opinion About Starbucks Overall Strategy        11

Summary        11

References        13

Introduction

        Starbucks is the world's largest producer of specialty coffee and related products. In particular, the company sells whole and ground coffee, disposable products, various ready-made drinks, tea, and other branded products. Since its inception in 1985, the corporation has reached a significant scale since it is currently present in 78 markets around the world where the number of employees is 291,000 people (Starbucks Corporation, 2018). A company doing business around the world could face various risks that may have different degrees of influence on its strategy and success. The main ones are related to the risks of strategic development, execution, and competitors, where the vital point is to assess their potential impact on the business. To further increase its scale, the entity must carefully manage its risks to minimize negative consequences. Therefore, it is advisable to conduct a strategic risk analysis using various tools to develop mitigation strategies and evaluate Starbucks' overall strategy.

Starbucks Overall Strategy

        Currently, Starbucks has reached a considerable scale. The overall strategy of the company that contributed to this is to expand its presence in the global markets (Starbucks Corporation, 2018). By the established strategic plan, Starbucks seeks to increase the broad base of its stores in a disciplined way, both in the existing developed countries and in the new rapidly developing ones. The implementation of the strategy is carried out by expanding its presence through channels, such as grocery stores, retail stores, and institutional catering organizations. At the same time, the primary goal of the company is to preserve the reputation of the most respected and well-known global brand (Starbucks Corporation, 2018). Also, to achieve greater success in their tasks, Starbucks, using its many years of experience, is continually trying to improve products to be able to offer customers new, more relevant goods. Finally, an integral part of the company's strategy is the obligations under the Global Social Impact agreement (Starbucks Corporation, 2018). It is assumed that sticking to high responsibility in Starbucks communities benefits all business stakeholders, which contributes to the achievement of their goals. Thus, the strategic position of the company is aimed at further growth by increasing its facilities on an international scale.

Key Strategic Risks

The key threats, in this case, might be the risks associated with strategic development, execution, and competitors since they can have a potential impact on the implementation of an established expansion strategy. Therefore, the use of such strategic tools as internal SWOT analysis and Porter’s Five Forces to analyze the industry might help determine the most dangerous of them, and the probability and impact matrix assesses the identified risks.

SWOT Analysis

        Strengths:

        The main advantage of Starbucks is a strong market position and widespread brand recognition. The company is considered one of the world's largest producers and suppliers of specialized coffee, and its operations are carried out in 78 countries (Starbucks Corporation, 2018). Starbucks effectively uses its licensed brand logo to increase global recognition and recognition, which enhances its competitive advantage. The next strength of the company is that it offers the highest quality products to which the greatest attention is paid. Trying to control the entire supply chain process, Starbucks enforces strict standards when creating various coffees and blends that are sold to the customers (Starbucks Corporation, 2018). Accordingly, by doing so, it has more value to its customers who later chose the brand. Another strength of Starbucks is being efficient in human resource management. The company tries to maintain good relations with its employees around the world, support, and encourage them to make a positive contribution to the organization, which ultimately affects good customer service (Starbucks Corporation, 2018). As a result, the company's stores attract consumers with its warm atmosphere and excellent service. Finally, the following strengths of Starbucks include high social responsibility in society and technology development. Through duties concerning recycling and waste reduction, the company creates goodwill among the public. In turn, the use of technology allows increasing its efficiency, which contributes to the achievement of strategic plans. Thus, Starbucks has much strength to ensure continued growth.

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