PHILIPPINE CHRISTIAN UNIVERSITY

“Starbucks: Brewing Success and Leading the Coffee

Industry – a Case Study”

A Case Study Presented to the Graduate School of Business Administration

In Partial Fulfillment
Of the Requirements for the
Subject of Strategic Management 2

Group 1
Agustin, John Christopher
Bergado, Myleen
Biolena, Mhargot
Fortunato-Lobchoy, Julienne
Mirasol, Marie Danica Therese

Dr. Neil Bermudez

2023
I. Case Background
A. Introduction
Starbucks Corporation (Starbucks) is an American multinational chain of coffeehouses and
roastery reserves headquartered in Seattle, Washington. It is the world's largest coffeehouse
chain.
Starbucks was founded in 1971 by Jerry Baldwin, Zev Siegl and Gordon Bowker at Seattle's
Pike Place Market. During the early 1980s, they sold the company to Howard Schultz who, after
a business trip to Milan, Italy, decided to convert the coffee bean store into a coffee shop serving
espresso-based drinks.

Known for its quality coffee and espresso drinks, Starbucks offers a wide selection of hot and
cold drinks, as well as snacks and pastries. The company is strongly committed to ethical coffee
sourcing, sustainability and social responsibility. Starbucks offers a unique and inviting
environment in its stores, often considered the "third place" for people to gather, work and
socialize. With a global presence in more than 80 countries, Starbucks continues to evolve and
innovate, adapting to changing consumer preferences and expanding its menu to remain a leader
in the coffee industry. On March 2023, Laxman Narasimhan succeeded Schultz as Starbucks’
CEO.

B. Mission Statement
Starbucks' mission is clear and concise: "With every cup, every conversation, every community -
we nurture the limitless possibilities of human connection". This new mission recognizes that
connection is a basic human need. Study after study shows that loneliness is a major public
health problem and that togetherness is urgently needed. Human relations are now explicitly part
of the company's mission. It is also expanding its reach from "neighborhoods" to "communities,"
inviting people in stores and digital spaces to join the conversation.

C. Past Objectives
In previous years, Starbucks' main goal was rapid expansion. The 1990s and 2000s marked the
company's efforts to open a significant number of stores worldwide. The focus was on achieving
a ubiquitous brand. Starbucks has diligently transformed itself from primarily a coffee bean
trader to a global chain of coffee shops.

D. Current Objectives
Today, Starbucks' "Growth at Scale" agenda is not only to expand the store portfolio, but also to
update the menu, improve the digital customer experience and strengthen ties with local
communities. The company is constantly evolving to adapt to changing consumer preferences
and global trends.

E. Strategies
Starbucks used several strategies to achieve its goals. It has mastered the art of retail expansion
by focusing on prime locations to maximize visibility. The product diversification strategy added
espresso drinks, teas and food to serve a wider customer base. Digital transformation has been a
cornerstone of Starbucks' success with mobile apps, mobile ordering and loyalty programs that
increase customer convenience. The company and its sustainability initiatives, ethical coffee
sourcing and commitment to social responsibility have made it an even more informed
consumer. Starbucks also recognizes the importance of a quality coffee experience that promotes
brand loyalty and community building. Its entry into key international markets reflects its global
expansion strategy.

F. Financial Situation
Starbucks' financial situation is characterized by consistent income and profit. Its commitment to
fiscal responsibility and sustainable practices has supported its long-term financial stability. As
of October 27, 2023, Starbucks has a market cap or net worth of $ 105.40 billion with an
increase by 4.96% in its market cap in one year. According to Starbucks Report Q3 Fiscal 2023,
global comparable store sales increased 10%. The company opened 588 net new stores, crossing
the 37,000 store count threshold globally, ending the period with 37,222 stores of which 51% is
company operated and 49% licensed. Consolidated net revenues of $ 9.2 billion, up 12% from
the prior year. GAAP operating margin is increased at 17.3% from 15.9% in the prior year,
primarily driven by sales leverage, pricing and productivity improvement.

G. Current Issues and Concerns Being Faced by the Company’s Management

1. The Lingering Shadow of COVID-19
The COVID-19 pandemic has been an ongoing challenge for Starbucks. While
vaccines have offered hope, the unpredictable nature of the pandemic and its evolving
variants continue to affect operations. Starbucks had to implement health and safety
measures, deal with fluctuating customer traffic and adapt to different regulations in
different regions.

2. Supply Chain Disruptions

Supply chain disruptions have affected many industries, and Starbucks is no
exception. Challenges in sourcing coffee beans, packaging materials and distribution
logistics forced management to reassess and diversify their supply chain and ensure
product availability.

3. Labor Shortages and Rising Costs

Starbucks, like many other companies, is struggling with labor shortages and rising
labor costs. Recruitment, retention and adequate staffing are constant challenges.
Balancing the books amid rising commodity costs, employee wages and operating
costs is a difficult task for management.

4. Responsibilities of Sustainable Development

Starbucks is committed to ambitious sustainability goals that aim to reduce its carbon
footprint and address social issues. Achieving these goals while taking into account
environmental considerations and social expectations is no small feat. Management
must continually innovate in this space.

5. Competition and Market Dynamics

Various coffee shops and fast food restaurants compete with Starbucks. Starbucks is
concerned with constantly adapting to changing consumer preferences, staying ahead
of competitors and rebranding for a changing market landscape of which management
must intervene.
 6. Digital Transformation
The digital landscape is constantly evolving. Starbucks' management must keep pace
with innovation and maintain a strong digital presence. Ensuring a smooth and
engaging customer experience through the mobile app, loyalty program and digital
platforms is the main objective.

7. Market Expansion
Expanding into new markets is part of Starbucks' growth strategy. This requires a
nuanced understanding of local consumer preferences, cultural adaptations and
operational adaptations.

8. Changing Consumer Preferences

Consumer preferences are dynamic and health-conscious choices, demand for plant-
based products and aspects of sustainability are increasingly important. Starbucks
must constantly update its menu to meet these changing demands.

9. Social and Cultural Issues

Starbucks has faced social and cultural issues, such as concerns about racial bias in its
stores. The management's task is to deal directly with these problems and at the same
time ensure that the company remains in line with the values of a changing society.

II. Environment Analysis

A. General Environment
A.1 Opportunities
A.1.1. Socio-Cultural-Demographic Forces
 Growing consumer preference for premium and specialty coffee
 Growing demand for health conscious and sustainable products
 Global coffee culture and the desire for a "third place" (besides home and work) for
socialization
 The trend towards remote work, which may increase the demand for coffee shops as
alternative workplaces
A.1.2. Technological Forces
 Digitization and mobile technology can improve customer experience and loyalty
 Data analytics and artificial intelligence can help personalize offerings and optimize
operations
 Applying environmentally friendly technologies to promote sustainable practices
A.1.3. Economic Forces
 Global expansion into emerging markets with a growing middle class
 Pricing options for quality products
 Diversification of revenue sources through product innovations
A.1.4. Environmental Forces
 Increased consumer awareness of environmental sustainability can encourage the sale of
ethically produced coffee
 Eco-friendly packaging and energy-efficient practices can reduce costs and attract
environmentally conscious customers
 A.1.5. Politico-Legal Forces
 Favorable government policies that promote small scale farmers and sustainable
agriculture
 Starbucks' protection of intellectual property branding and product innovation
 Tax incentives for sustainable business practices
A.2. Threats
A.2.1. Socio-Cultural-Demographic Forces
 Changing consumer preferences and trends, including a shift from traditional coffee to
healthier alternatives
 Social concern about the effects of high-calorie sugary drinks, which could affect sales of
some Starbucks products
 Social and cultural factors that can reduce socialization in coffee shops, especially in the
post-pandemic era
A.2.2. Technological Forces
 Rapid technological development can make it difficult for Starbucks to keep up with the
latest innovations that can affect the customer experience
 Greater reliance on technology may reduce the need for physical retail space as more
people work and interact online
 Cyber security threats and data breaches that can compromise customer trust and
financial security
A.2.3. Economic Forces
 Economic recessions and downturns can reduce consumer spending on premium coffee
and specialty beverages
 Fluctuations in currency exchange rates can affect coffee bean costs and global supply
chain operations
 Fierce competition in the coffee market can lead to a price war that erodes profit margins
A.2.4. Environmental Forces
 Growing concerns about climate change could disrupt coffee supply chains and increase
production costs
 Regulatory pressure to reduce environmental impacts may require significant investment
in sustainable practices and supply chain adaptation
 Negative publicity related to environmental practices or ethical sourcing could harm
Starbucks' reputation
A.2.5. Politico-Legal Forces
 Legal and regulatory challenges such as food safety, labeling and advertising regulations
can lead to legal disputes and compliance costs
 Political instability in some markets can cause business disruptions or brand damage
 Greater scrutiny of labor practices, such as wages and working conditions, can lead to
legal and reputational risks
B. Operating Environment
B.1 Opportunities
B.1.1. Rivalry Among Competing Firms
A few of Starbucks’ competitors: Seattle’s Best, Dunkin’, J.Co, McDonald's (McCafe)
 Competition can drive innovation and motivate Starbucks to improve its product offering
and customer experience
 A strong brand can help Starbucks maintain its competitive advantage over its
competitors
B.1.2. Potential Entrants
 High barriers to entry, including capital requirements and economies of scale, may deter
potential entrants
 Starbucks' established supply chain and distribution networks provide a competitive
advantage
B.1.3. Substitute Products
 Growing demand for specialty and premium coffee can mitigate the threat of
substitutability
 Diversifying the product range to include healthier and more sustainable options can
counteract substitute products
B.1.4. Bargaining Power of Suppliers
 Starbucks can work with coffee bean producers to support sustainable and ethical
sourcing and improve supplier relationships
 Building strong, long-term relationships with suppliers can lead to cost stability and
quality control
B.1.5. Bargaining Power of Buyers
 Starbucks can create strong brand loyalty and customer commitment, which reduces the
bargaining power of buyers
 Offering loyalty programs and promotions can attract and retain customers
B.1.6. Industry Growth
 The global coffee market continues to grow, giving Starbucks opportunities to increase
its market share
 Emerging markets with a rising middle class represent untapped growth potential
B.1.7. Shareholders' Actions
 Investments can be attracted by satisfying shareholders through dividends, share
buybacks and share prices
 Implementing sustainable and ethical business practices accommodates shareholders'
values
B.1.8. Creditors' Actions
 Maintaining good credit relationships can provide favorable financial opportunities for
expansion and investment
 Adopting responsible financial practices can improve Starbucks' credibility
B.1.9. Community Perceptions
 A positive community perception can improve brand image and customer loyalty
 Participating in corporate social responsibility (CSR) initiatives can generate goodwill in
local communities
B.2 Threats
B.2.1. Rivalry Among Competing Firms
 Fierce competition in the coffee industry can lead to a price war, which can reduce profit
margins
 Competing companies can imitate Starbucks' successful strategies that reduce its
differentiation
 The presence of established competitors in the local market can limit Starbucks' market
share
B.2.2. Potential Entrants
 Low barriers to entry in some markets may encourage new entrants to challenge
Starbucks
 Disruptive technologies and business models can enable innovative startups to compete
effectively
 Economies of scale and established supply chain networks may not deter all potential
entrants
B.2.3. Substitute Products
 Changing consumer preferences for non-coffee drinks or alternative sources of caffeine
could be a threat to Starbucks
 Growing health awareness and demand for healthier options may lead consumers to look
for alternatives
 The availability of cheaper or more convenient substitutes may affect Starbucks' sale
B.2.4. Bargaining Power of Suppliers
 Dependence on a few key suppliers, such as coffee bean producers, can create
vulnerability to supply disruptions
 Fluctuations in commodity prices can affect production costs and profitability
 Suppliers with strong bargaining power can demand a higher price, which affects
Starbucks' margins
B.2.5. Bargaining Power of Buyers
 Increasing consumer price sensitivity, especially during a recession, could affect
Starbucks' pricing strategy
 High customer expectations require consistent quality and service that can be difficult to
maintain
 The availability of many cafes and retail channels can increase the number of buyers'
options and bargaining power
B.2.6. Industry Growth
 Saturation of mature markets can limit opportunities for growth and expansion
 Market fluctuations, economic uncertainty or economic recession can adversely affect
industry growth
 Excessive expansion can lead to cannibalization of existing stores
B.2.7. Shareholders' Actions
 Shareholders' short-term focus on quarterly earnings can create pressure to cut costs or
increase dividends, threatening long-term sustainability
 Activist shareholders can influence strategic decisions that are not Starbucks' long-term
vision
 Adverse stock development or financial instability can cause shareholder dissatisfaction
B.2.8. Creditors' Actions
 High levels of debt or financial instability could limit investment opportunities and put
Starbucks under financial pressure
  Changes in interest rates can affect the cost of debt capital, which affects the company
and its financial situation
 Default on debt obligations could have serious consequences for Starbucks' financial
stability and reputation

B.2.9. Community Perceptions

 Negative community perceptions, such as protests or boycotts related to Starbucks' policy
or practice, may damage its reputation and sales
 Failure to address local community issues can lead to legal or regulatory challenges
 Balancing stakeholder interests and addressing community issues can be a complex and
ongoing challenge
C. Internal Environment
C.1 Strengths
C.1.1. Marketing
 Starbucks has built a strong global brand known for its quality and innovation in the
coffee industry. The strength of this brand is an important marketing objective
 Starbucks effectively uses digital platforms and social media to connect with customers,
promote their products and manage their digital presence
 Starbucks is constantly introducing new products and seasonal offers to keep its menu
fresh and appealing to a wide customer base
C.1.2. Production/Operations
 Starbucks is known to have an extensive global network of suppliers. Starbucks sources
its coffee beans from three coffee producing regions: Latin America, Africa & Asia
Pacific.
 It increased its number of stores from 1,886 to 33,833 between 1998 to 2021. Currently
Starbucks operates two types of stores i.e. company operated and licensed stores. It has
17,133 company operated stores and 16,700 licensed stores globally
 Company has acquired six companies including Seattles Best Coffe, Teavana, Tazo,
Evolution Fresh, Torrefazione Italia Coffee & Ethos Water. These acquisitions have
proven quite successful for Starbucks
 Starbucks maintains an efficient supply chain that ensures timely delivery of coffee
grounds and other supplies to its stores and minimizes costs
 The company's focus on product quality and consistency worldwide is a major strength
 Starbucks stores are designed to create a welcoming and homely atmosphere, enhancing
the overall customer experience
C.1.3. Finance
 Starbucks has shown consistent revenue growth over the years, indicating its strong
financial performance
 The company's financial management and cost management practices have resulted in
sustainable profitability
 Starbucks' ability to finance and support its global expansion strategy is a testament to its
financial strength
C.1.4. Organization & Management
  Starbucks reinvests its profits in expanding its business in different locations. Its efficient
operations and well-planned strategic decisions have produced many advantages for the
company
 Starbucks has a strong management team that has guided the company and its growth and
success
 The company and its culture emphasize customer service, staff development and social
responsibility, which contribute to its positive public image
 Starbucks' management makes informed decisions based on data analysis and strategic
planning
C.1.5. Human Resources
 Starbucks treats its employees very well which eventually translates into happier
employees serving customers well. Starbucks has been consistently listed as one of the
Fortune's Top 100 Places to Work for.
 According to Rossam Williams, president of the North American chain of Starbucks
stores, Starbucks will increase the minimum wage of its workers to $15
 Starbucks invests in extensive employee training programs to ensure consistent, high-
quality employee service
 The company offers competitive compensation and benefits, including health insurance
and stock options to help attract and retain top talent
 Starbucks has demonstrated a commitment to diversity and inclusion in its workforce,
which drives innovation and strengthens its brand
C.1.6. Research & Development
 Starbucks has also diversified its business operations by introducing new innovative
merchandises and new food items. One such example is the addition office cubes made of
coffee which results in a stronger coffee flavor
C.1.7. Information Systems
 Starbucks' digital platforms, including its mobile app and rewards program, improve the
customer experience and provide valuable data for marketing and personalization
 With the help of information systems, supply chain operations are improved, costs and
waste are reduced
 Starbucks uses data analytics to gain insights into customer behavior, store performance
and market trends, enabling data-driven decision making
C.2 Weaknesses
C.2.1. Marketing
 Over the years, Starbucks has a lot of in-demand products. This can negatively affect the
brand image of the company and lead to the loss of the customer base
 Expensive – For many middle class and working class customers, Starbucks is more
expensive than Mc Donald’s and other coffee shops. Its high costs make it unaffordable
for customers
 Starbucks relies heavily on seasonal offers and limited-time products, which can be
affected by consumer preferences and seasonal demand fluctuations
 In some markets, Starbucks has experienced saturation that may limit its ability to expand
and lead to cannibalization of its own sales
C.2.2. Production/Operations
 In 2016, Starbucks recalled two products. One was the sausage, egg and the cheddar
breakfast sandwich and the other was cheese and fruit bistro box. The reason for recalling
these products was the threat of contamination and allergens
 Product imitability – Starbucks does not have the most innovative brands on the market.
This makes product imitability reasonably straightforward for other businesses
C.2.3. Finance
 Starbucks has high operating costs, including real estate and labor costs, which can affect
profitability, especially in areas where the cost of living is high
 As a global brand, fluctuations in exchange rates can affect Starbucks' financial
performance, particularly in international markets
C.2.4. Organization & Management
 The organization has been chastised by many civil and environmental advocates for its
immoral procurement practices. According to them, it buys coffee beans from poor third
world producers. It has also been accused of breaking the rules of the “Fair Coffee
Trade”.
C.2.5. Human Resources
 Starbucks has faced labor relations challenges in the past, including disputes related to
wages and employee benefits, which can impact the company's reputation and employee
morale
 High staffing in the retail business can lead to recruitment and training costs, which
affects the efficiency of operations and the continuity of customer service
C.2.6. Research & Development
 Many goods have generalized standards – any of the merchandise ranges are not in line
with most markets cultural norm in certain regions
C.2.7. Information Systems
 With the increased use of digital technology, Starbucks faces potential data breaches and
customer security risks
 Disruptions in the reliability and performance of Starbucks' digital platforms such as
mobile can impact customer experience and sales

Strength: Weakness:

 Strong Brand Image  High Prices

 Global Presence  Environmental Impact (energy
 Product Diversification (including their consumption)
Seasonal Offerings)  Customer Traffic Congestion
 Customer Loyalty (Starbucks Rewards  Health and Dietary Concerns (in
program) offering healthier option while
 Ethical Sourcing (Supporting farmers) maintaining the taste and quality)
 Innovative technology (for customer
convenience)
 High Quality Coffee
 Store Ambiance

Opportunity: Threat:

 Diversification (by offering more

 health-conscious options)  Intense competition in key markets
 Sustainability initiatives  Economic Fluctuations
 Strategic partnerships and alliances  Supply chain vulnerabilities (for its
(expand its market presence and reach coffee beans – caused by natural
a broader audience) disaster or climate change)
 Digital Innovation (where customer can  Negative publicity (Labor-related
also customize/personalize their controversies)
orders)  Global events and crises (e.g. Covid-19
pandemic) – may lead to temporary
closures

D. External Factor Evaluation Matrix

External Factors Weight Rating Weighted Score

Diversification (Health-conscious) 0.15 3 0.45
Sustainability Initiatives 0.05 4 0.2
Strategic Partnerships and Alliances 0.20 4 0.8
Digital Innovation (Customization) 0.10 2.5 0.375
Intense Competition in Key Markets 0.20 4 0.8
Economic Fluctuations 0.10 2 0.3
Supply Chain Vulnerabilities (Coffee beans) 0.05 4 0.2
Negative Publicity (Labor-related
controversies) 0.10 4 0.2
Global Events and Crises (e.g., Covid-19) 0.05 3 0.15
1 3.475

Opportunities and threats in the given SWOT were used as the external factors for the EFE
Matrix. Weights are assigned based on the perceived significance of each factor and ratings
reflect Starbucks’ performance in each area. The total weighted score of 2.75 suggests the
following:
 Overall Positioning: Starbucks is moderately positioned to address the external
opportunities and threats listed in the EFE Matrix. The score indicates that, on average,
Starbucks has a fair ability to capitalize on the listed opportunities and manage the
identified threats in its external environment.
 Opportunity Emphasis: Starbucks might not be fully exploiting the potential opportunities
in its external environment. There may be room for improvement in terms of leveraging
these opportunities to their full potential.
 Threat Mitigation: While the score suggests that Starbucks is moderately positioned to
manage the identified threats, it could enhance its efforts to address and mitigate these
threats effectively.
 Competitive Context: Starbucks operates in a competitive environment with various
external factors at play. While it has strengths (as indicated in the IFE Matrix) to
 capitalize on, there are also areas where it needs to address weaknesses and external
threats.

E. Internal Factor Evaluation Matrix

Internal Factors Weight Rating Weighted

Score

Strong Brand Image 0.125 4 0.50

Global Presence 0.125 4 0.50

Product Diversification (Seasonal) 0.125 4 0.50

Customer Loyalty (Starbucks Rewards) 0.125 4 0.50

Ethical Sourcing (Supporting Farmers) 0.100 4 0.40

Innovative Technology 0.100 4 0.40

High Quality Coffee 0.100 4 0.40

Store Ambiance 0.100 4 0.40

High Prices 0.025 2 0.05

Environmental Impact (Energy) 0.025 2 0.05

Customer Traffic Congestion 0.025 2 0.05

Health and Dietary Concerns 0.025 2 0.05

1 3.80

Strengths and weaknesses in the given SWOT were used as the internal factors for the IFE
Matrix. Weights are assigned based on the perceived significance of each factor and ratings
reflect Starbucks' performance in each area.

The total weighted score for Starbucks is 3.80, indicating that the company has more
internal strengths than weaknesses. Starbucks should continue to build on its strengths and
work on mitigating weaknesses to further enhance its competitive position and meet
evolving customer expectations in the highly competitive coffee industry.

While the weaknesses identified in the IFE Matrix provide areas for potential
improvement:
 High Prices:
 o Run promotions and special discounts for customers who participates in
sustainability efforts (such as through reusable cup programs and
responsible consumption)
o Starbucks can also explore the option of adjusting prices based on the cost
of living in specific regions, allowing for better alignment with local
economic conditions
 Environmental Impact (Energy Consumption):
o Involve customers (in using reusable cups)
o Starbucks can commit to using more renewable energy sources. They
should implement green store design with features like energy-efficient
lighting, natural ventilation and insulation
 Customer Traffic Congestion:
o Provide training for staff to efficiently manage customer traffic especially in
handling peak periods
o Implement quick order options for customers in a hurry, such as pre-made
packages and express checkout
o Use a real-time traffic update on wait time and order status

 Health and Dietary Concerns:

o Starbucks should provide comprehensive nutritional information. This
information should be accessible on the website, mobile app, and in-store.
o Highlight allergen information: Clearly indicate potential allergens in menu
items to assist customers with food allergies.
o Train staff on dietary needs: Ensure that employees are knowledgeable
about dietary preferences and restrictions and can assist customers in
making suitable choices.
o Encourage customization: Allow customers to personalize their orders to fit
their dietary preferences and needs. Make customization options clear and
easy to use.

These recommendations provide a variety of techniques, such as sustainability initiatives,

congestion management, and menu items that are focused on health, to address the
weaknesses identified in the IFE Matrix. By addressing these issues, Starbucks can
strengthen its internal operations and better serve the different needs of its customers while
upholding its reputation for excellence and innovation.

F. Competitive Profile Matrix

The top two (2) Starbucks Competitors are Dunkin' and McDonald's (McCafe):

Starbucks Dunkin' Mcdonald's

Weight Ratin Weighted Rating Weighted Ratin Weighted
g Score Score g Score

Market Expansion 0.25 4 1.00 3 0.75 4 1.00

Brand Strength 0.25 5 1.25 4 1.00 4 1.00
Product Diversification 0.20 4 0.80 3 0.60 3 0.60
 Global Presence 0.20 5 1.00 3 0.60 4 0.80
Customer Loyalty 0.10 5 0.50 4 0.40 4 0.40
Total: 1 4.55 3.35 3.80

Interpretation:
According to the Comparative Analysis Matrix, Starbucks with a weighted score of 4.55 is
more competitive in the market than its competitors.

Data and/or Information supporting the CAM:

We have identified 5 factors that comparatively assess its competitiveness.
 Market Expansion is rated based on the extent of the company's expansion efforts
o Starbucks received a strong rating of 4 because of their strong commitment
to market expansion. Starbucks is the world's most prominent specialty
coffee producer and retailer, with over 32,000 locations in 80 countries.
Starbucks has a network of owned and operated locations. About 51% of the
company's outlets are owned, and the remaining 49% are licensed to
qualified partners. Starbucks has more control over the quality of its goods
and services due to the balance between company-operated and licensed
stores, which also enables the company to quickly enter new markets.
o Dunkin', previously known as Dunkin' Donuts, rating is 3. For more than
60 years, Dunkin' Donuts has provided devoted customers with over 3,100
locations in more than 30 nations outside of the US. Due to the fact that
almost all Dunkin' Donuts locations are franchisees, the business cannot
easily enter new markets.
o McDonald’s rating is also 4 due to its numerous outlets. According to
Statista, McDonald's operated and franchised a total of 40,275 outlets
worldwide in 2022, an increase from the 40,031 eateries in 2021. There are
also no statistics available for the McCafé. Even though McDonald's has
more franchise locations, not all of them have a McCafé.
 Brand Strength reflects the recognition and trustworthiness of the brand
o Starbucks continues to hold the top spot in the market for brand strength,
receiving a perfect score of 5. Starbucks is not just a well-known brand but
also a representation of quality and innovation in the coffee and beverage
sector, holding an impressive 21.83% market share.
o Dunkin' Donuts received a 4 for brand strength due to its significant brand
presence in the US and its 16.09% market share. Many Americans choose
Dunkin' when they want something affordable and convenient because of its
simple and distinctive branding.
o McDonald's Cafe has a brand strength rating of 4 and a market share of
11.94%. The company's coffee offerings have significantly contributed to
boosting its brand recognition because it is a byword for dependability and
consistency.
 Product Diversification assesses the range and variety of products offered
o Starbucks sets the industry norm with a rating of 4, setting the standard for
innovative product variety. It provides over a thousand different food
 options, such as coffee, smoothies, cookies, tea, muffins, pastries,
doughnuts, fresh fruit juice, blended beverages, and much more.
o Dunkin' receives a score of 3 due to its seamless shift from selling
doughnuts to coffee. Along with a selection of donuts and baked products,
they provide a range of coffee and non-coffee beverages.
o With a rating of three, McDonald's Cafe has increased the variety of
products it offers throughout time. McDonald's Cafe has expanded its
appeal to include both coffee aficionados and snack fans by adding a variety
of coffee beverages, smoothies, and a selection of baked products to its
well-known coffee and breakfast menu. The company's sustained efforts in
this regard give it a competitive advantage.

 Global Presence is an evaluation of the extent of international reach.

o Starbucks, which has a perfect score of 5, rules the coffee and beverage
sector with an unparalleled global presence. Due to the company's
deliberate global expansion into many nations and areas, it is now a
household name almost everywhere. Its store locator is working and can
locate the nearest Starbucks shop.
o Dunkin' rated 3 and maintains a strong presence mostly in the US. Its
international reach is not as extensive as Starbucks', despite having a sizable
domestic network of outlets. We are unable to use the store finder on their
main website in our area. Our region does not have access to the store finder
on their main website despite the fact that there are shops nearby.
o McDonald's, which is ranked 3 as well, is well known for having restaurants
all over the world. But as previously indicated, McDonald's Cafe is
restricted even though it offers iced or brewed coffee. It is also unable to
locate McDonald's in the vicinity when using their store locator.
 Customer Loyalty reflects the strength of customer loyalty programs and retention
efforts.
o Starbucks has developed a reputation for outstanding client loyalty,
receiving the highest possible score of 5. Starbucks Rewards, a customer
loyalty program, is among the best-known and most popular ones in the
business. Members of the program receive a variety of perks, such as a free
drink, pastry, or slice of cake with every 100 stars collected, access to
exclusive perks (double stars day, birthday treat), and the convenience of
ordering ahead using the app.
o Dunkin', which has a rating of 4, has also developed a loyalty program. In
place of DD Perks, Dunkin' Rewards promotes return visits for its members.
In our area, the main website is unavailable, but according to some sources,
Dunkin' Rewards members receive 10 points for every dollar spent, and
rewards begin at 150 points. However, customers have expressed their
anger at the change from DD Perks to Dunkin' Rewards, which has caused
controversy. A premium beverage like Dunkin's famous latte costs 900
points, or 500 points for a free basic coffee.
o McDonald's, which has a rating of 4, has been effective in generating client
loyalty through the use of its strong brand. Various incentives are available
 through the McDonald's app and loyalty program, such as discounts and
freebies after a predetermined amount of transactions. Members must
download the McDonald's Rewards app to avail of the discounts.

Starbucks stands out as the leader in the competitive environment of the coffee and
beverage sector, outperforming Dunkin' and McDonald's in a number of crucial key
factors. The CAM shows that Starbucks is the industry standard due to its unwavering
dedication to quality and innovation.

G. Assumptions
G.1. General Environment Stability
Using the PESTEL framework (Political, Economic, Sociocultural, Technological,
Environmental, and Legal) to analyze Starbucks' assumptions, we are able to derive
the following assumptions based on its current position and strategic direction:
 Political – Due to its established global presence and versatility, Starbucks is
likely to continue effectively navigating various political environments
around the world. To preserve stability in a variety of marketplaces, the
business will keep an eye on and react to changes in tax laws, trade laws, and
political situations.
 Economic - Starbucks' diverse product options and global presence allow it to
cater to a wide range of consumer budgets, which will help it maintain a
degree of economic stability. To maintain ongoing growth, the business will
adjust to cyclical changes in the economy and shifting consumer purchasing
habits.
 Sociocultural - Starbucks' emphasis on inclusivity, diversity, and community
building will help them stay relevant in both social and cultural spheres. The
business will continue to monitor changing sociocultural trends and modify
its products and advertising tactics to align with the values of the community
and the expectations of its customers.
 Technological - To improve consumer convenience, order personalization,
and operational effectiveness, Starbucks will keep utilizing technological
breakthroughs. To preserve a competitive edge and adapt to shifting
consumer demands, the company will continue to invest in digital
technologies and mobile technology.
 Environmental - Starbucks is going to continue to support ethical sourcing
and environmental sustainability. The company will lessen its environmental
impact even more and promote sustainable agriculture in response to
customer demand for eco-friendly methods and stricter environmental
restrictions.
 Legal - Starbucks is committed to complying with legal requirements and
regulations in all of the countries where it conducts business. In order to
adhere to changing legal and regulatory requirements, the company will
continue its ethical business practices, such as fair trade and responsible
sourcing.
G.2. Industry Growth Prospects
 Assessing Starbucks within Porter's Five Forces framework (Competitive Rivalry,
Supplier Power, Buyer Power, Threat of Substitution, and Threat of New Entry):
 Competitive Rivalry - The beverage and coffee industries are highly
competitive. Starbucks faces competition from a variety of businesses,
including McDonald's, Dunkin' Donuts, and local coffee shops. The industry
is saturated, with several companies contending for market share. The fact
that Starbucks has a strong brand, a global presence, and customer loyalty
programs helps it to maintain a competitive advantage. The company stands
out from rivals due to its dedication to innovation and quality.
 Supplier Power - In the Five Forces analysis framework, larger suppliers have
stronger bargaining power over the coffee business. Starbucks mitigates this
by engaging in ethical sourcing practices and maintaining long-term
relationships with coffee growers. Its size and purchasing power also give the
company an advantage, which reduces supplier power to some extent.
 Buyer Power - Buyer power in the coffee industry is moderate. Consumers
have options, and they can be price-sensitive. However, Starbucks mitigates
buyer power through its diverse product range, quality, and the Starbucks
Rewards program, which fosters customer loyalty. Starbucks has some ability
to influence customer choices based on brand and experience.
 Threat of Substitution - The threat of substitution in the coffee and beverage
industry is moderate. While consumers can opt for other beverages or coffee
shops, Starbucks' strong brand, quality, and diverse menu make it less
susceptible to substitution. The company continually innovates and
diversifies its offerings, reducing the attractiveness of substitutes.
 Threat of New Entry - The threat of new entry in the coffee and beverage
industry is moderate. While it is relatively easy to open a coffee shop,
Starbucks' strong brand, global presence, and resources act as barriers to new
entrants. Established players like Starbucks have economies of scale, making
it challenging for new competitors to compete on the same level.
G.3. Company's Competitive Position
Starbucks' competitive position is underscored by its customer-centric approach, a
strategy deeply rooted in the company's overarching goal. With a clear objective to
exceed customer expectations, Starbucks aligns its efforts across seven functional
areas to provide more than what the customer needs. It is a goal-driven company, not
solely focused on producing great coffee but committed to enhancing the overall
customer experience and promoting a good reputation among its target market.

At the core of this strategy is the creation and nurturing of a strong brand image, a
highly recognized and respected brand that resonates with customers and builds both
customer loyalty and trust. This trust extends to Starbucks' ethical sourcing practices,
which not only ensure high-quality coffee beans but also support farmers, appealing
to socially-conscious consumers.

Starbucks has adopted an innovative approach by embracing technology to enhance

customer convenience and engagement. The use of innovative tools, including
 mobile ordering and payment, reflects the company's commitment to giving
customers more than they expect in terms of convenience and customization.

The company's product diversification strategy, including the introduction of

seasonal offerings, caters to a wide range of customer preferences, surpassing basic
coffee expectations. Simultaneously, Starbucks creates a unique ambiance in its
stores, characterized by comfort and an inviting environment. This commitment to an
excellent store ambiance elevates the overall customer experience.

Furthermore, Starbucks extends its responsibility beyond the coffee cup by focusing
on environmental protection and social commitment, aligning with the societal
values and ethical considerations of its target market. This positioning strategy
reinforces Starbucks as a responsible and respected brand, dedicated to giving its
customers more than just coffee.

III. Problem Statement supported with evidence.

Evidence suggests that Starbucks grapples with a multifaceted challenge deeply rooted in
its internal landscape and the evolving external environment. Internally, Starbucks boasts
strengths in a strong brand image, global presence, product diversification, customer
loyalty, ethical sourcing, innovative technology, high-quality coffee, and store ambiance.

However, its management must navigate a host of contemporary external issues, which
includes the following:
1. The persistent and unpredictable impacts of COVID-19
2. Supply chain disruptions
3. Labor shortages
4. Rising costs
5. Ever-increasing demands for sustainability

Furthermore, Starbucks contends with fierce competition and dynamic market dynamics,
necessitating constant adaptation. In the digital realm, the company must keep pace with
ever-evolving innovations and secure its digital presence. Expanding into new markets
and addressing changing consumer preferences is imperative. Social and cultural issues,
such as racial bias concerns, warrant management's immediate attention. This
compounded challenge demands that Starbucks align its internal strengths with dynamic
external pressures, strategically responding to ensure its continued growth and resilience
in the face of a rapidly changing global coffee industry.

This problem statement provides evidence of the internal strengths and external
challenges Starbucks faces, highlighting the need for a strategic approach to address these
complex issues and drive the company's growth and resilience.

IV. Alternative Courses of Action

Starbucks can consider different strategies to address the challenges and issues outlined in
the problem statement. These can proactively address its challenges and seize opportunities
to maintain its leadership in the evolving global coffee industry post-pandemic.

A. TOWS Matrix
To address the multifaceted challenges faced by Starbucks and formulate alternative
courses of action using the TOWS Matrix, we can examine the internal strengths (S),
internal weaknesses (W), external opportunities (O), and external threats (T).

SO Strategies (Maximize Strengths to Exploit Opportunities):

1. Leverage the strong brand image to promote sustainability initiatives, attracting
environmentally conscious consumers (Strength 1 + Opportunity 2).
2. Utilize the Starbucks Rewards program to incentivize the adoption of healthier menu
options, thereby diversifying the product range (Strength 4 + Opportunity 1).
3. Capitalize on global presence and innovative technology to offer personalized, health-
conscious options, addressing customer dietary concerns (Strength 2 + Opportunity 4).
ST Strategies (Maximize Strengths to Mitigate Threats):
4. Utilize the strong brand image and customer loyalty program to maintain a competitive
edge in key markets where competition is intense (Strength 1 + Threat 1).
5. Leverage ethical sourcing and sustainability initiatives to mitigate supply chain
vulnerabilities related to coffee beans (Strength 5 + Threat 3).
WO Strategies (Minimize Weaknesses to Exploit Opportunities):
6. Address health and dietary concerns by introducing affordable and tasteful healthier
options, thereby diversifying the product range (Weakness 4 + Opportunity 1).
7. Use digital innovation to streamline and manage customer traffic better, addressing
congestion issues (Weakness 3 + Opportunity 4).
WT Strategies (Minimize Weaknesses to Mitigate Threats):
8. Implement cost-effective environmental initiatives to reduce energy consumption and
mitigate environmental impact, addressing concerns and negative publicity (Weakness 2
+ Threat 4).

Strength Weaknesses
 Strong Brand Image  High Prices
 Global Presence  Environmental Impact
 Product Diversification (energy consumption)
(including their Seasonal  Customer Traffic Congestion
Offerings)  Health and Dietary Concerns
 Customer Loyalty (Starbucks (in offering healthier option
Rewards program) while maintaining the taste
 Ethical Sourcing (Supporting and quality)
farmers)
 Innovative technology (for
customer convenience)
 High Quality Coffee
 Store Ambiance
Opportunities 1. Leverage the strong brand 1. Address health and dietary
 Diversification (by offering image to promote sustainability concerns by introducing affordable
more health-conscious initiatives, attracting and tasteful healthier options,
options) environmentally conscious thereby diversifying the product
  Sustainability initiatives consumers (Strength 1 + range (Weakness 4 + Opportunity
 Strategic partnerships and Opportunity 2). 1).
alliances (expand its market 2. Utilize the Starbucks Rewards 2. Use digital innovation to
presence and reach a broader program to incentivize the streamline and manage customer
audience) adoption of healthier menu traffic better, addressing
 Digital Innovation (where options, thereby diversifying the congestion issues (Weakness 3 +
customer can also product range (Strength 4 + Opportunity 4).
customize/personalize their Opportunity 1).
orders) 3. Capitalize on global presence
and innovative technology to offer
personalized, health-conscious
options, addressing customer
dietary concerns (Strength 2 +
Opportunity 4).
Threats 1. Utilize the strong brand image 1. Implement cost-effective
 Intense competition in key and customer loyalty program to environmental initiatives to reduce
markets maintain a competitive edge in key energy consumption and mitigate
markets where competition is environmental impact, addressing
 Economic Fluctuations
intense (Strength 1 + Threat 1). concerns and negative publicity
 Supply chain vulnerabilities
2. Leverage ethical sourcing and (Weakness 2 + Threat 4).
(for its coffee beans – caused
sustainability initiatives to mitigate
by natural disaster or climate
supply chain vulnerabilities related
change)
to coffee beans (Strength 5 +
 Negative publicity (Labor- Threat 3).
related controversies)
 Global events and crises (e.g.
Covid-19 pandemic) – may
lead to temporary closures

B. Internal-External Matrix
To develop alternative courses of action for Starbucks using the Internal-External (IE)
Matrix, we need to assess the organization's internal strengths and weaknesses in relation to
external opportunities and threats.
These are the calculations for the total weighted score for each factor:
External Factors (Opportunities and Threats):
Opportunities (O):
Opportunities (O):
 Total Weighted Score for O = (3 * 0.15) + (4 * 0.05) + (4 * 0.20) + (2.5 * 0.10) = 0.45 +
0.2 + 0.8 + 0.375 = 1.825
Threats (T):
 Total Weighted Score for T = (4 * 0.20) + (2 * 0.10) + (4 * 0.05) + (4 * 0.10) + (3 * 0.05)
= 0.8 + 0.3 + 0.2 + 0.2 + 0.15 = 1.65
Internal Factors (Strengths and Weaknesses):
Strengths (S):
 Total Weighted Score for S = (4 * 0.125) + (4 * 0.125) + (4 * 0.125) + (4 * 0.125) + (4 *
0.10) + (4 * 0.10) + (4 * 0.10) + (4 * 0.10) = 0.50 + 0.50 + 0.50 + 0.50 + 0.40 + 0.40 +
0.40 + 0.40 = 3.60
Weaknesses (W):
 Total Weighted Score for W = (2 * 0.025) + (2 * 0.025) + (2 * 0.025) + (2 * 0.025) =
0.05 + 0.05 + 0.05 + 0.05 = 0.20
Now, we can plot these scores in the IE Matrix:
IFE TOTAL WEIGHTED SCORE
 Strong Weak
Average
(3.0-4.0) (1.0-
(2.0-2.99)
1.99)
EFE I
TOTAL High
II III
WEIGHTE (3.0-4.0)
D SCORE
Medium
(2.0- IV V VI
2.99)
Low
(1.0- VII VIII IX
1.99)

Quadrant I (Aggressive/Concentric): This quadrant represents an Aggressive/Concentric

strategy. Starbucks has strong internal factors and is well-aligned with external opportunities.
This suggests that Starbucks should consider strategies focused on expanding and
consolidating its current business.
C. Grand Strategy Matrix
To develop alternative courses of action for Starbucks using the Grand Strategy Matrix, we
need to assess the company's competitive position and growth potential.

Quadrant I - Aggressive/Concentric:
1. Competitive Position: Starbucks is in a strong competitive position in this quadrant. With
high internal factors and alignment with external opportunities, it has a robust foundation
to pursue an aggressive strategy. Starbucks' strengths, such as a strong brand image and
global presence, make it well-suited to capitalize on external opportunities like the
demand for healthy products.
2. Growth Potential: Starbucks has significant growth potential in this quadrant. Its strong
internal factors align well with external opportunities, creating a favorable environment
for expansion and innovation. The company can consider aggressive strategies to
leverage its strengths and seize market opportunities.

Quadrant II - Defensive/Concentric:
1. Competitive Position: Starbucks may face competitive challenges in this quadrant due to
a strong internal foundation that is not fully aligned with external opportunities. There
may be a potential mismatch between strengths and the external environment.
2. Growth Potential: The growth potential in this quadrant may be more limited as
Starbucks needs to address the gap between its strong internal factors and external
opportunities. Strategies may involve defending its current market position, optimizing
operations, and addressing external challenges to remain competitive.

Quadrant III - Aggressive/Diversification:

1. Competitive Position: Starbucks may face competition and external challenges in this
quadrant. Its internal factors are not as strong, but there are significant external
opportunities. This suggests a need for diversification to capture those opportunities.
 2. Growth Potential: The growth potential is significant but requires diversification into new
markets, products, or business areas that align with the external opportunities. Starbucks
can leverage its strong brand and resources to explore new ventures outside its core
business.

Quadrant IV - Defensive/Diversification:
1. Competitive Position: Starbucks may face challenges and external obstacles in this
quadrant, as both its internal factors and external opportunities are not strong. There may
be a mismatch between internal strengths and external opportunities, and diversification
could be a way to mitigate risks.
2. Growth Potential: The growth potential in this quadrant is limited within Starbucks' core
business. Diversification into new areas or markets may be necessary to find growth
opportunities outside its current business scope.

RAPID
MARKET
GROWTH

Quadrant II Quadrant I
1. Has a strong internal foundation that is not fully aligned 1. Robust foundation to pursue an aggressive strategy
with external opportunities 2. Strong brand image
2. Potential mismatch between strengths and the external 3. Global presence
environment 4. Enough resources to supply the increasing demand for
3. There is a need to address the gap between its strong healthy products
internal factors and external opportunities. 5. Capability to create favorable environment for
4. Strategies may involve defending its current market expansion and innovation
position, optimizing operations, and addressing external 6. Can consider aggressive strategies to leverage its
challenges to remain competitive strengths

WEAK Quadrant III Quadrant IV STRONG

COMPETITIVE 1. Face competition and external challenges. 1. Both Starbucks’ internal factors and external
COMPETITIVE
2. Internal factors are not as strong opportunities are not strong
POSITION POSITION
3. Significant external opportunities 2. Mismatch between internal strengths and external
4. There is a need for diversification to capture opportunities
opportunities 3. Diversification could be a way to mitigate risks
5. Growth potential requires diversification 4. Growth potential is limited within Starbucks’ core
6. Can leverage its strong brand and resources to explore business
new ventures 5. Diversification into new areas or markets may be
necessary to find growth opportunities

SLOW
MARKET
GROWTH

D. Summary of Strategies
Let us identify the strategies from the TOWS Matrix, Internal-External Matrix, and Grand
Strategy Matrix that fall into the specified categories:
1. Integration Strategies:
a. Forward Integration:
 TOWS Matrix: Starbucks can consider forward integration by expanding its own
branded consumer products into retail stores and supermarkets.
  Grand Strategy Matrix: Starbucks can pursue forward integration by expanding its
retail presence and consumer product offerings.
b. Backward Integration:
 TOWS Matrix: Starbucks can explore backward integration by strengthening its
relationships with coffee bean suppliers and investing more in ethical sourcing.
 Grand Strategy Matrix: Starbucks can consider backward integration by further
developing direct relationships with coffee bean suppliers.
c. Horizontal Integration:
 TOWS Matrix: Starbucks can consider horizontal integration by expanding its
offerings through strategic partnerships with complementary businesses.
 Grand Strategy Matrix: Starbucks can pursue horizontal integration by acquiring
or partnering with complementary coffee-related brands.

2. Intensive Strategies:
a. Market Penetration:
 Grand Strategy Matrix: Starbucks can focus on market penetration by increasing
its presence in existing markets, attracting more customers, and enhancing in-
store experiences.
b. Market Development:
 Grand Strategy Matrix: Starbucks can pursue market development by expanding
into new geographical regions or markets with high coffee demand and offering
localized products.
3. Diversification Strategies:
a. Concentric Diversification:
 Grand Strategy Matrix: Starbucks can explore concentric diversification by
expanding its product line to include more health-conscious options, aligning with
changing consumer preferences.
4. Defensive Strategies:
a. Retrenchment:
 Grand Strategy Matrix: If Starbucks faces challenges or mismatches between
internal strengths and external opportunities, it may consider retrenchment
strategies to streamline and protect its core operations.
b. Divestiture:
 Grand Strategy Matrix: Starbucks may opt for divestiture as a strategic choice to
shed underperforming or non-core assets.

In summary, Starbucks may consider the specified strategies across multiple matrices, and
the specific strategies chosen will depend on its business goals and market conditions. These
strategies can encompass forward, backward, or horizontal integration, market penetration,
market development, concentric diversification, retrenchment, and divestiture as appropriate.

STRATEGY OPTIONS TOWS IEM GSM Total

Integration Strategies
1. Forward Integration 1 1 2
2. Backward Integration 1 1 2
 3. Horizontal Integration 1 1 2
Intensive Strategies
1. Market penetration 1 1
2. Market development 1 1
3. product development
Diversification Strategies
1. concentric diversification 1 1
2. conglomerate diversification
3. horizontal diversification
Defensive Strategies
1. joint venture
2. retrenchment 1 1
3. divestiture 1 1
4. liquidation

In summary, Starbucks' potential strategies span several categories, including integration

strategies (forward, backward, and horizontal), intensive strategies (market penetration
and market development), one diversification strategy (concentric diversification), and
defensive strategies (retrenchment and divestiture). The specific strategies chosen will
depend on Starbucks' goals and the competitive landscape.

ALTERNATIVE COURSES OF ACTION

The proposed courses of action (ACA) were identified based from the TOWS Matrix, Internal-
External Matrix and further validated through the evaluative dimensions of the Grand Strategy
Matrix.

TOWS Matrix pointed out that leveraging strengths such as a strong brand image, innovative
technology, and ethical sourcing to seize global expansion opportunities and meet changing
consumer behavior, including the demand for contactless service and sustainability. Starbucks
can also enhance customer loyalty to navigate a competitive landscape and address the issue of
high prices by exploring pricing strategies and value-added offerings. Additionally, the matrix
recommends improving store ambiance to attract and retain employees and optimizing the real
estate strategy to match evolving urban dynamics. Finally, investing in digital transformation is
vital to offer personalized, secure experiences while safeguarding against cyber threats. These
courses of action provide Starbucks with a strategic roadmap to adapt to post-pandemic
challenges and ensure its continued growth and resilience in the global coffee industry.

The Internal-External Matrix recognizes that Starbucks has a strong internal position, with a
robust brand image, global presence, and a commitment to ethical sourcing. To capitalize on
these strengths, Starbucks can consider pursuing market development and expansion in regions
with a high demand for its products, as well as focusing on diversification by adding new, health-
conscious offerings to its product line. Simultaneously, the matrix highlights the need to address
internal weaknesses, including high prices and environmental impact, by optimizing pricing
strategies and implementing sustainability initiatives. This strategic approach enables Starbucks
to align its internal strengths with external opportunities while mitigating weaknesses and
responding to market demands effectively.

Starbucks' appropriate strategies fall under Quadrant I of the Grand Strategy Matrix, signifying a
strong competitive position and high growth potential. To capitalize on this, Starbucks should
focus on market penetration by expanding its market share and in-store experience, pursue
product development to cater to evolving consumer preferences, explore market development by
expanding into new regions with high demand, and consider concentric diversification with
health-conscious and complementary product offerings. These strategies align with Starbucks'
strong brand image and global presence, positioning the company for continued growth and
market expansion.

The Summary of Strategies Matrix confirmed the three most feasible alternative courses of
action for Starbucks as follows:
1. Forward Integration: Starbucks should actively explore and invest in enhancing its
forward integration strategies. This could involve strengthening its digital platforms,
expanding delivery services, and potentially introducing new products directly to
consumers. By improving the customer experience and increasing convenience,
Starbucks can solidify its position in the market.
2. Backward Integration: Starbucks should consider reinforcing its control over the supply
chain. This may include forming closer partnerships with coffee producers, ensuring a
more resilient and sustainable sourcing process. By securing its supply chain, Starbucks
can mitigate risks related to disruptions and enhance the quality and reliability of its
products.
3. Horizontal Integration: Starbucks can explore partnerships or acquisitions with
emerging specialty coffee brands. This strategy aims to diversify the product portfolio
and strengthen the brand's position in the market. By aligning with innovative and niche
players, Starbucks can tap into new customer segments and stay competitive in the
evolving coffee industry.

The emphasis on integration strategies suggests that Starbucks should focus on optimizing its
internal processes, enhancing customer-facing aspects, and strategically aligning with external
partners to achieve sustained growth and resilience.

V. Recommended Alternative and Action Plan

A. Quantitative Strategic Planning Matrix
The Quantitative Strategic Planning Matrix (QSPM) is utilized for evaluating possible strategies
and comparing them as alternatives among each other. The QSPM helped to set their goals and
objectives.

Five steps are necessary to compile a QSPM:

1. Provide a list with internal and external factors: strengths and weaknesses can be
compiled from the IFE Matrix. Opportunities and threats are taken from the EFE Matrix.
2. Identify strategic alternatives: strategic alternatives are taken from the TOWS analysis
 3. Assign weights: weights are assigned to key internal and external factors. Those weights
are taken from IFE and EFE matrices.
4. Assign attractiveness scores: attractiveness scores are assigned based on whether the
factor makes a difference in the decision about which strategy to pursue. If the answer is
“yes”, then the score if 1= not attractive, 2= somewhat attractive, 3=reasonably attractive,
and 4= highly attractive. If the answer is “no”, the score will be 0.
5. Calculate total attractiveness score: multiply the weights with the attractiveness scores
and sum up the products.

The strategic alternative with the biggest total attractiveness score portrays the most attractive
strategy for the company.

Alternative 1 Expand Market Share Alternative 2 Maintain Market Share

Key Factors Weight Attractiveness Total Weight Attractiveness Total
Score Attractiveness Score Attractiveness
Score Score
Strengths
Successful and 0.15 4 0.6 0.15 2 0.3
popular product
lines
Access to high- 0.1 4 0.4 0.1 2 0.2
quality Arabica
coffee beans
Strong supply 0.1 4 0.4 0.1 3 0.3
chain
management
Strong 0.05 4 0.2 0.05 4 0.2
intellectual
property and
R&D capabilities
Strong financial 0.1 4 0.4 0.1 2 0.2
muscle
Strong brand 0.1 3 0.3 0.1 3 0.3
image
Reputable 0.05 3 0.15 0.05 2 0.1
customer service
Strong and 0.05 4 0.2 0.05 1 0.05
reputable partners
Variety of flavors 0.05 0 0 0.05 0 0
Weaknesses
Overextension of 0.1 0 0 0.1 4 0.4
product portfolio
High prices of 0.1 4 0.4 0.1 4 0.4
products
Environmental 0.05 1 0.05 0.05 3 0.15
issues
Sum Weights 1 1
Opportunities
High growth rates 0.2 4 0.8 0.2 1 0.2
in emerging
markets
High growth 0.1 4 0.4 0.1 2 0.2
potential of
single-serve
coffee market
High growth 0.05 4 0.2 0.05 2 0.1
potential for
flavored coffee in
the US
High growth 0.05 4 0.2 0.05 2 0.1
potential for
courtesy coffee
products
Threats
High bargaining 0.15 3 0.45 0.15 4 0.6
power of
suppliers

Trademark 0.1 4 0.4 0.1 4 0.4

infringements in
emerging markets

Increasing 0.15 4 0.6 0.15 4 0.6

competition from
local competitors
and new entrants
in emerging
markets

Saturated market 0.1 3 0.3 0.1 4 0.4

in developed
economies

Increasing price 0.1 3 0.3 0.1 4 0.4

sensitivity
customers

Sum weights 1 1
Sum Total 6.75 > 5.6
Attractiveness
Score
The QSPM Matrix clearly shows that Starbucks should drive an aggressive expansion strategy
both in domestic and foreign markets. Maintaining current market shares and trying to foresee
and then dodge attacks from competitors is not an option.

B. Action Plan
Time Person/ Activities Estimated
Frame Department Cost
Year 1 1 month Board of Conduct a meeting to address the $50,000.00
Directors, company's current problems.
Chief
Executive  Identify the problem's root cause.
Officer  Deliberate the ideas and
suggestions to address the issue.

1 to 2 Board of Develop a strategic plan. $25,000.00

months Directors,  Gather inputs and assess your -
Chief current strategy. $30,000.00
Executive  Conduct an External and Internal
Officer Analysis.
 Identify Strategic Issues.
 Develop a clear statement of
vision, mission, and objectives
that align with the company's
goals.
 Specify the ways in achieving the
company's goals.
 Restructure the organizational
chart.
 Proposal of the consolidated
solution for the problem.
 Segregation of duties per
department.
1 to 2 Finance & Not
months Accounting applicable
Department
2 to 3 Research and Conduct a Market Analysis $70,000.00
months Development  Perform a market research to
Department investigate the current market
environment, new trends, analyze
customer segment, and
preferences in the coffee industry.
 Compare the company’s
competitive advantage.
 Conduct a market mapping to
locate the countries with price-
insensitive consumers.
 Analyze the findings and put it
 into action.
 Focus on the countries with price-
insensitive consumers that value
quality over prices.
Yearly Legal Compliance with laws and regulations $ 70,000.00
Department  Ensure compliance with all laws
and regulations in the countries
where the business will operate
be it legal, political, or
environmental.
1 to 2 Human Creating equal opportunities $ 50,000.00
months Resources  Diverse hiring for additional
Department employees
 Provide careers for the youth and
farming communities
 Conduct a community service
1 monthCorporate Address the existing uncautious Not
Strategy expansion applicable
Department
1 month Research and Customer analysis in the existing $ 20,000.00
Development markets
Department  Survey on consumer’s satisfaction
existing products and services
 Analysis on consumer’s feedback
6 Production/ Product Development in existing $
months operations markets 100,000.00
Department  Create new flavors of drinks and
pastry
 Prepare necessary ingredients
 Ensure that the coffee ingredients
are of good quality and reasonable
cost
 Produce samples of proposed
products
 Perform test marketing
2 to 3 Marketing Launching and commercializing new $
months Department products 100,000.00
 Introduce the new products to the
existing markets
 Develop a direct marketing
campaign
 Increase Starbucks social media
engagement
Year 2 to 1 month Legal Preparation of business documents $
3 Department  Submission and filing of the 100,000.00
documents needed for business
registrations for the expansion
  Review of necessary laws that must
be complied with
2 years Marketing STRATEGY EXECUTION: $150,000.0
Department Market Development 0
 International expansion through
joint venture and licensing in the
countries the business plans to
operate
 Year 2: Finland (Product Licensing
Agreement)
 Year 3: India (Joint Venture)
 Construction of the additional retail
stores and branches
2 years Production/ Product Development/ Production of $75,000,00
Operations high quality products 0 per year
Department  Ensure ethical sourcing of high
quality, sustainable products
 Conduct product-improvement
processes of the beverages that will
cater to the demand and preferences
of customers
 Creating a product for best value
2 years Marketing Market Penetration/ efforts to increase $80,000,00
Department the market share 0 per year
 Invest in a great marketing team
through outsourcing
 Focus on digital advertising
 Invest in information technology to
develop the website and other
channels for customer support
 Innovate the customer loyalty
program by offering Starbucks
rewards and other incentives
Continu Procurement Ensure the proper flow of procurement Not
ous Department of raw materials and other supplies applicable
 Establish a good relationship with
the global suppliers
 Monitoring of supplier’s
performance through the Starbucks
Suppliers Guidelines and Standards
 Provide timely and appropriate
resources to mitigate food safety
risks
 Ensure that suppliers will deliver the
proper volume of raw materials and
other supplies on time
Year 4 to Yearly Finance & Evaluate the financial impact on the Not
5 Accounting wider enterprise Applicable
Department
Yearly Production/ Continuous expansion $
Operations Opening approximately 20-30 stores 450,000,00
Department 0
Yearly Marketing Boost the sales in the three market $95,000,00
Department segments 0
 Promotion through advertisements
and commercials
 Find a brand ambassadors to
persuade a wide range of customers
Yearly Board of Strategy Evaluation Not
Directors  Quarterly monitoring of the overall Applicable
and other performances per department
chief  Determine the effectiveness of the
executives strategy in the company’s growth
 Reassess and review the internal and
external factors in the industry
 Take corrective actions if necessary

C. Financial Projections
C.1. Sales Forecast
In connection with its Reinvention plan, Starbucks introduced a framework for accelerated
earnings growth over the next three years, underpinned by enhanced comparable store sales
growth, increased store count growth, continued margin expansion, and disciplined capital
allocation.

“Starbucks is a growth company, and our accelerated expansion is a direct reflection of the
expected returns from our Reinvention plan,” said Ruggeri. “By making strategic and highly
targeted investments to drive value for partners, Starbucks will also drive value for customers
and shareholders, while managing costs, improving margins, and elevating the Starbucks
Experience for all stakeholders.”

From fiscal 2023 to fiscal 2025, Starbucks expects comparable store sales growth to be in the
range of 7% to 9% annually, both globally and in the U.S., up from the previous range of 4% to
5%. In China, Starbucks expects outsized comparable store sales performance in fiscal 2023 and
fiscal 2024, as the market laps the severe impact of COVID-related lockdowns, with growth
normalizing in the new range of 4% to 6% in fiscal 2025, an increase from the prior range of 2%
to 4%, reflecting an increased digital capability and confidence in the vast opportunity ahead in
this key growth market.

The company’s global store portfolio is expected to grow by roughly 7% annually on a net basis
from fiscal 2023 to fiscal 2025, up from the previous estimate of approximately 6%. This
increase is driven largely by accelerated growth across the U.S. portfolio as purpose-built store
formats in conjunction with the Reinvention plan is expected to deliver net new store growth of
3% to 4% annually, compared to approximately 3% as previously estimated. Starbucks also
expects to continue robust store development in China, with net unit growth of approximately
13% annually. Globally, Starbucks expects to approach 45,000 stores by the end of 2025, and is
well on track to reach approximately 55,000 stores by 2030, as projected at its 2020 Investor
Day.

Starbucks now expects global revenue growth in the range of 10% to 12% annually from fiscal
2023 to fiscal 2025. This represents an improvement from the company’s previous range of 8%
to 10%, driven by priority investments that elevate partner engagement and store efficiency,
industry-leading digital programs, an engaged and growing Starbucks Rewards membership
base, game-changing product innovation, and a rapidly expanding global footprint. The company
expects solid margin expansion in fiscal 2023 with progressively more expansion in fiscal 2024
and fiscal 2025. Non-GAAP EPS growth is expected to be in the range of 15% to 20% annually
through fiscal 2025, representing an improvement from the previous range of 10% to 12%.

Starbucks plans to resume its share buyback program reinstituting a healthy return of shareholder
capital, yielding an annual EPS benefit of approximately 1%, net of incremental interest,
beginning in fiscal year 2024. Between dividends and share buybacks, the company expects to
return approximately $20 billion to its shareholders in the next three years.

C.2. Income Statement Forecast

Centering the Partner Experience in a Thriving Network
Starbucks partners are at the core of the Reinvention plan, as the company recommits to
investing in its partner base with a three-pronged model of support that empowers partners to
thrive at work, thrive as individuals, and thrive together. Specifically, by investing in partners
through recruiting, training, and onboarding, partners will be better empowered and equipped to
deliver high-quality customer experiences, uplifting brand affinity and customer loyalty. This, in
turn, enables increased value back to partners through wages, benefits, programming, and tools
for continued personal growth, which are expected to increase retention and productivity.

For fiscal 2023, Starbucks has identified a number of near-term solutions that will be
implemented to ensure a thriving partner experience:

 Wage and recognition innovation, including helping give partners the hours they need,
expanding digital tipping, and incorporating other opportunities to increase overall pay.
 New well-being benefits, including offering enhanced sick pay, new savings and student
loan management benefits, and additional mental health support.
 Personalized career mobility through a newly introduced partner app and the
development of personalized career paths.
 Investments in store managers, including new leadership trainings, reinvention of
scheduling and decisioning tools, and career journey mapping to improve store manager
retention and empower them to focus on core functions of the job that increase
satisfaction and overall performance of their store partners. Stores managed by partners
with over three years of tenure have 13% greater weekly sales and higher customer
satisfaction.
This important work is beginning with Starbucks over 9,000 U.S. company-operated stores.
Starbucks then plans to rapidly implement the most effective and scalable best practices to its
other U.S. and global stores.

Unlocking Experiential Convenience for Customers

As part of the Reinvention plan, Starbucks is unlocking the intersection of convenience and
connection by introducing enhancements to the customer experience across retail and digital that
meet customers wherever they are, expanding the Third Place experience beyond the physical
store. As part of these efforts, Starbucks is investing in purpose-built store concepts, delivering
beverage innovation, and expanding effortless digital convenience.

Investing in purpose-built store concepts: Starbucks is reimagining the store environment by

introducing purpose-built store concepts that meet customers wherever and whenever they want
and improve the partner experience. This includes investing an incremental $450M in the
existing U.S. store base in fiscal year 2023 with continued investment in fiscal 2024 and 2025.
Starbucks expects these investments will create efficiencies, unlock capacity for partners, and
enable increased throughput to support increasing customer demand.

With new store economics expected to continue delivering 50% return on investment and 25%
cash margin, Starbucks looks to accelerate U.S store growth to 3-4% annually. The company
sees tremendous opportunity to further diversify and expand formats across cafes, pick up,
delivery-only and drive-thru only locations. The diversified portfolio of stores and customer
channels such as Mobile Order & Pay will enable Starbucks to further meet its customers
whenever and wherever they want.

Delivering beverage innovation: To improve partner and customer experiences, Starbucks has
developed the Siren System, a proprietary new equipment innovation designed to meet the
growing demand for customization of hot and cold beverages and warm foods. As part of the
Siren System, Starbucks has redesigned its cold beverage station, which significantly reduces the
time and number of steps to make cold beverages, unlocking productivity gains and ultimately
freeing up time for partners to connect with customers. In addition, Starbucks is developing a
new way of extracting cold coffee and espresso with the Cold Pressed Cold Brew system. This
new, proprietary technology delivers cold press coffee in a matter of seconds and in fewer than
four steps, a step-change improvement when compared to today’s cold brew which is steeped for
20 hours and takes more than 20 steps to make. The Cold Pressed Cold Brew will begin testing
in stores in fiscal 2023.

Starbucks is also elevating the quality and craft of hot brewed coffee with the launch of Clover
Vertica. Using proprietary Clover technology, Clover Vertica offers every customer a freshly
ground, freshly brewed cup of hot coffee in just 30 seconds. Starbucks has already begun rolling
out this equipment to stores and expects it will be fully deployed to all U.S. stores in the next
three years.

Expanding effortless digital convenience: Today’s customers are increasingly prioritizing the
effortless, experiential convenience and personalization enabled by Starbucks Rewards, Mobile
Order & Pay, and Starbucks Delivers. To make it even easier for customers to get Starbucks
when and where they want, Starbucks is growing its Starbucks Delivers program in the U.S. with
a new partnership with DoorDash, which will expand to a national scale alongside UberEats in
fiscal 2023.

As previously announced, Starbucks is also evolving its Starbucks Rewards program with
Starbucks Odyssey, a Web3-enabled experience that will bridge the physical and digital
customer experience. Through Starbucks Odyssey, customers will unlock a new generation of
experiential benefits – both digitally and in-person – and become a part of a digital community
built on human connection.

Accelerating Starbucks Leadership Position in International

Starbucks International segment continues to accelerate growth for the company, with two-thirds
of global retail growth over the next three years expected to come from its international business.
Underpinning this strong foundation and ongoing momentum is the strength of the licensing
model, acceleration of the digital Starbucks Experience, and the purpose-driven growth agenda
in China.
Strength of the licensing model: Licensed stores represent more than 50% of the Starbucks
International portfolio and are driving a significant portion of future growth through best-in-class
operations experience, paired with unparalleled expertise in the markets they operate and the
needs of their local customers. Under Starbucks licensing model, licensees are positioned as
business partners, who not only operate stores but also invest in and drive innovation at the
company – for example, through region-specific beverages – and growth in their markets and
across the globe. The licensing model is a key competitive advantage and enabler for Starbucks,
culminating in higher return on invested capital and positioning the company to realize the full
potential of the brand. In total, Starbucks has over 17,000 licensed stores including 6,500 in the
U.S.

Acceleration of the digital Starbucks Experience: While International is still in the early stages
of digital expansion, Starbucks has the foundation in place to significantly accelerate growth
with 28 million active Starbucks Rewards members internationally. Today, just over 10% of
transactions in international licensed stores originate digitally. To accelerate the rollout of the
digital Starbucks Experience around the world, Starbucks is unveiling Starbucks Digital
Solutions, a platform created exclusively for our International markets to deliver a consistent
digital experience for partners and customers in every location.

Purpose-driven growth agenda in China: Even as Starbucks second largest market, China’s
coffee market is still in its early stages, and Starbucks is evolving its growth framework in the
market to capture its full growth potential. Through the flywheel of continued store expansion,
growth in omni-channel, ongoing digitization efforts, increased customer and partner
engagement, and the extension of coffee craft and innovation leadership, Starbucks will drive
meaningful growth in China, as sales are expected to nearly double over the next three years,
while store count is expected to grow by 50%, reaching 9,000 stores.

Long Runway for Growth in At-Home and Ready-to-Drink

Through Starbucks leadership position in the at-home and ready-to-drink channels, the company
reaches customers across every major coffee segment, providing an elevated experience
wherever its customers are. Today, Starbucks serves 300 million consumer occasions per week
across 86 markets in channels outside of its retail stores. Starbucks sees significant opportunity
for further growth through portfolio expansion, innovation and leveraging Starbucks partnership
expertise. In at-home coffee, Starbucks is expanding its reach with products that highlight its
strengths in locally relevant ways, such as the recent launch of Starbucks super-premium mini
cups in China, and the upcoming launch of Starbucks Reserve on Nespresso Vertuo. Starbucks is
also innovating and introducing new bold flavors and formats in ready-to-drink, entering the
energy category with the launch of Starbucks Baya™ Energy and bringing the Starbucks Pink
Drink, inspired by a global customer favorite, to a convenient new ready-to-drink format.
C.3. Balance Sheet forecast
C.4. Cash Flow forecast
VI. References
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program-changes
 https://www.dunkindonuts.com/en/locations
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positioning.html#:~:text=Positioning%20of%20Starbucks,-Positioning%20is
%20considered&text=The%20company's%20positioning%20strategy
%20is,environmental%20protection%2C%20and%20social%20commitment
 https://edubirdie.com/examples/starbucks-dunkin-donuts-and-mcdonalds-comparative-
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%20brand%20with%2021.83%25.
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%20leading%20brand%20with%2021.83%25
 https://en.wikipedia.org/wiki/Starbucks
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2023/Starbucks-Reports-Q2-Fiscal-2023-Results/default.aspx?
fbclid=IwAR2BxDjvSBGgiSiew8nVnqo6YjHsE67RfLYvByLSwd5PAZO3GEQKFwL5
1oo
 https://www.macrotrends.net/stocks/charts/SBUX/starbucks/balance-sheet
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 https://www.mcdonalds.com/us/en-us/restaurant-locator.html
 https://www.mcdonalds.com/us/en-us/mymcdonalds.html
 https://panmore.com/starbucks-coffee-five-forces-analysis-porters-model
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 https://ph.investing.com/equities/starbucks-corp-income-statement
 https://www.starbucks.com/about-us/
 https://www.starbucks.com/careers/working-at-starbucks/culture-and-values/
 https://stockanalysis.com/stocks/sbux/market-cap/
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 https://dd.ge/en/globalpresence
 https://www.statista.com/statistics/219454/mcdonalds-restaurants-worldwide/
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 https://starbuckscard.ph/sbcard/
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%2010%25%20to%2012%25.
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