Executive summary
Moreover, the environmental analysis and opportunities and threats show what more the company can do in its five year plan projected plan. The five year projected plan clearly shows that one and a half year of the initial phase will be spent on the internal development of channels in the organization which will help the company achieve its goals tasks and exploit all the opportunities in the course of five years to reap the desired results as they are given in the appendix.
Moreover, even if the strategies fail, the company will not lose it all in the first blow, but it will stand a chance to come up with a different strategy and basing its new strategy on the homework that it has already done in the initial one and a half year. The initial one and a half year will never be wasted until and unless the company goes out of business. The research and brainstorming will always be there as an asset for the company.
Mission and vision
Mission
For every organization, defining a mission statement at the beginning of the business plan and with clear goals and targets is one of the most important factors for the success of the business. The reason is the fact that the mission statement clarifies the purpose that the organization is there for the employees, the stakeholders and the customers for everything that the organization is committed to. With the help of a clear mission and vision statement the company is also able to maintain its focus on the goals and keep its operations and services in line with the goals by providing services and products whose essence reflects what the company promises in the mission and vision statement.
The mission statement of Starbucks is to provide finest coffee not only in only one market but for the entire world and in this process they promise not to compromise their key principles and commitments in the process of growing from one market to another. this also helps the company in its decision making process and reduces and removes a number of confusions when it comes to specific principles and rules that have been set forth for the operations and management of the company.
Starbucks follows clear guidelines in order to keep its operations in line with the world-class standards to take its operations around the globe. Also, the guidelines are more connected with the vision of the company however the company has been able to integrate them with the mission statement of the company as well. Six basic principles that the company has set forth for its operations are discussed below
The company is committed to provide a great environment for both the employees and the customers and this will be achieved by two basic factors, respect and dignity, for every employee, stake holder and customer of the company.
Incorporation of diversity into the organization in order to be able to be flexible to different market conditions and decision making situations.
Compliance with the world class standards from the very basic level that is purchase of raw material, roasting of coffee, and ensuring that the coffee being delivery is fresh and as according to the standards that the company promises its customers.
Keeping customers satisfied through enthusiasm and with a great level of involvement and interaction with the customer in order to build relations with the customers for long term vision and mission of the company.
Also, the company is focused with a positive frame of mind for the betterment of the community that it is serving and also the environment that the company is operating in.
Lastly, for the success of every organization, profits are the most important motives therefore, the company is committed to keep its profitability high in order to achieve whatever it has planned.
Vision
In simple terms, the company aims towards making star bucks a world-class brand which is also one of the most recognized brands around the world. Today, whenever we look at the unique star bucks logo with the lion, we see we instantly recognize that it is the logo of star bucks even if star bucks has not been mentioned with the logo specifically.
The statement that has been discussed above is a broad statement which tells us where the company wants to see itself in the course of its operations however, the company has to achieve this status after fulfilling the following factors.
First of all, as the company promises of providing the finest coffee, it actually has to make sure that it does brew the finest coffee in order to fulfill its promises with the customers and encourage repeated visits (Michelli, 2006).
Secondly, to make the company a world-class brand, the company has to make sure that it has a clear image in the mind of the consumer, the image that is more shining and attracting and the image which will enable the consumer to forget about all other brands whenever it comes to anything related to coffee.
Thirdly, this is one area where the company lacks in its mission statement. The company has mentioned that it wants to be the world-class recognized brand, but it failed to mention that does it want to be the number one around the world or does it want to be above the majority of the brands that are providing similar services or are in the same line of operations. Moreover, the company also lacks in providing a clear guideline or time frame in which it will accomplish its targets. This is also an important factor because of the fact that the company has to understand that when defining mission and goals, they need to be time bound, they are not supposed to be left on their own to be fulfilled at the right time, but you have to define the right time and then start working for it.
Environmental Volatility Analysis Current Competitive Position
(Hoovers Online)
Before, we conduct a complete external environmental analysis we will first try to analyze in brief the companys financial performance along with the competitors of the company over last three years. Above is the chart which compares the stock price of star bucks with the industry average in the sociality eateries industry. We can clearly see the performance of star bucks amongst all others as obviously the company seems to be the defining factor in the industry because of the fact that the industry averages seem to reflect the same trends that we can see in the star bucks stock price fluctuations. Behind this factor, there is one basic reason that is the size of the market share that the company has in the global and local markets as well. The larger the size of the market share, the larger the company grows and the larger stakeholders and shareholders the company will attract. Similarly, any good or bad news with the company will increase or decrease investor confidence in the company and it will subsequently have a direct effect on other companies in the industry. For example, when we saw that star bucks stock prices were increasing, we also saw that a reason behind this was the fact that people were getting more informed and interested in in-house brewing and making of coffee and thus, this trend reflected on all other companies as well and it actually reflected on their stock prices too.
(Hoovers Online)
Above is the chart in which we will see that the company stock prices are compared with three companies (Wiel, 2008). These companies are New World Coffee Inc, Diedrich Coffee Inc and Green Manhattan Coffee Inc. we see that the stock price of star bucks has been constant and growing steadily for all these years due to the fact that the loyal customers have their utter confidence in the company and that everyone looks at the company for being a reliable venture for investment, however, when we compare the NWCI and DDRX, we see that they are nowhere in the comparison. DDRX tried to compete in the initial stages and plunged over the stock price of star bucks for a little while, but since then we have seen a drop in the stock price of DDRX up to the level near a dollar or so. However, GMCR has shown tremendous results as compared to the star bucks, this is may be because of the market share that it captured from the star bucks however, the stock prices in the recent few years show clearly that the consumer confidence is decreasing as the stock prices are plunging downwards as well. Whereas, star bucks is performing steadily with no drops and steady growth rate.
(Hoovers Online)
Lastly, when we look at the graph above, we compare the stock prices of star bucks with the industry average in the Dow Jones stock exchange. It is obvious that star bucks are a market leader and thus the consumer confidence and the level of involvement with the investments with the company is highest with the star bucks than any other company. Though a couple of drops in the graph, but still, the company have been able to revive it and still remain at the top.
Environmental Analysis
Opportunities and Threats
Economic Factors
Economic factors are always there in order to make a company successful or to drive it towards failure. The reason is the fact that until and unless the business plan incorporates the economic conditions of the target market and economy, it will not be able to deliver its products that will be able to satisfy their needs, wants and preferences according to the price and dollars they are willing to spend. For example, a branded Gucci store will not be able to operate in the poorest areas of Nigeria or India because of the fact that the economies of these places are not in line with the basic purpose behind the product.
According to the company sources, the sales of the company have been increased many folds and have reached sales up to 3 billion dollars including the five year projected plan as of now, however, the company does faces some opportunities and threats by repeated openings of stores and concentration of outlets in small areas. One of the problems that have been identified is the cannibalization effect that the company is facing, however, the management believes that as long as this cannibalization is helping to contribute in incremental sales and additional return on investments, this cannibalization will also help in keeping the competition down from competitors as well and thus it is justified.
Moreover, the product that the company is providing is not a luxury item. The products are in line with the purchasing power of almost all the economies that the company is tapping into and therefore the company looks at it as an advantage towards its mission and vision to make the company as global as possible (Burks, 2009).
Sociological Factors
We have seen that many companies look at the social factors just on the basis of compatibility with the society and the community they are operating in, but, the principles and strategies of star bucks are somewhat different in this case. It does not only matches its operations with the social environment around it, but, it also has a set of guidelines through which the company itself integrates and indulges in the social life of the consumers to make the consumers feel its presence and also to leave a positive impact on the overall environment. The guidelines are as follows
The company is focused on sharing information with its parents relating to environmental issues prevailing in the society and trying to overcome them for the betterment of the society.
The company is also determined to come up with solutions that are innovative and flexible and also result in a positive change.
The company is committed to buy sell and use products that are environmentally safe and healthy.
The company has also included the environmental consideration in its list of corporate values.
The company keeps a good track of the performance of all its projects and analyses the costs that it incurs on the society and then makes efforts to reduce or eliminate it as much as it can.
The company believes that it has a number of partners and stakeholders in its operations and thus it needs to take all of them on board in order to make the projects a success. These partners include the
Demographic factors
The company is also quite concerned about the world statistics of population distribution, and to its amaze and benefit, the target market of the company constitutes the largest percentage of the world percentage. On very large and broad view, we see that the company basically targets in the age group of 15-64. Another thing that the company considers important for designing its products and services is the concentration of ethnic groups in certain areas. US consists of 83 whites and 12 blacks which makes these two groups the most prominent groups that may be targeted in different ways in order to live up to their tastes, perceptions and preferences.
Legal and political forces
Star bucks has also faced a couple of lawsuits in its course of operations two of which being the major ones related to hourly labor rate and management cases filed by star bucks own employees. Although the company did not bare any liability or responsibility of such cases, still in order to maintain its reputation and keep itself away from legal litigation, the company agreed to agree upon the claims and the requirements put forth by the plaintiffs in order to clear all cases against the company.
As far as legal issues are concerned, we see that the company imports most of its coffee beans for in-house brewing from other countries which stands tall in front of the company as a threat at all times as any change in import or duty laws can affect the companies procurement. Also, a price increase due to extra duties will increase the price of the products and services provided by the company directly affecting the profits and the customers who will have to think whether to go for the much expensive cup of coffee or pastry or go to another competitor.
Targets for Strategic Improvement or Development
Our strategic management team has come up with a five year plan which is further distributed into quarters for each year in which we aim towards achieving the following targets
Projected Budget 10,000,000 Projected Sales Increase 300,000,000 (over 5 yr lifetime of strategy)Projected Profit () Increase 175,000,000 (over 5 yr lifetime of strategy)Projected Market Share Increase 15 (over 5 yr lifetime of strategy)
These are the targets that will be achieved over the period of five years and different areas, such as budgets, sales, profits and market share will be tapped in their own distinct manner in order to keep up the growth level. An overall increase of 15 per annum is targeted in all the areas and will be spread over the five year plan.
First Year
If we look at the appendix on page number ____ we will see that the in the first year, we do not see any sales or profits increase in the first quarter. The reason is the fact that the company believes that it will not be able to design or implement its policies in the best possible way until and unless the company bolsters and strengthens its information and research base regarding the target market. If we look at the time line for the first year, we see that in the first quarter, the company will achieve the following targets
Identify target market
Potential Location Specification
Hire Marketing Firm
Now the three objectives that will be accomplished in the first quarter reflect that the company is basically spending out if its budgets and does not expect a robust response. The reason is that this is just the base level, no policies and strategies are implemented, and rather, this is the design stage in which the company will design its products and the marketing strategies with the help of different outsourced departments and companies (Fellner, 2008).
The next quarters show that the company is now in the phase of attracting customers as the new locations and target market outlets are now operational with marketing promotions in place and now the company will focus on the following factors to develop the business even more
Joint Partner Identification
Site Selection
Joint Ventures
Contractors
Now in this stage we see that as the business grows, it cannot grow itself alone, it has to make certain alliances, partnerships and at times acquire companies which used to be suppliers of the company in the initial stage. This is known as vertical or horizontal integration in which the business is now spreading its roots from just an infant to the age of adolescence or teenage.
The company will now come into contract and partnership with a couple of stakeholders including
Suppliers
Contractors
Designers
Distributors
Information technology companies
Marketing companies
Production and management teams
HR Companies
This is important because in the initial the company has no expertise in order to take risky and difficult decision such as location and site planning. The company may be able to put forth its requirements but cannot dictate its requirements. Thus, hiring those who are good at it and coming into a partnership with them will actually help the company to come up with a synergy which will reflect the results in the coming three years.
Second Year
We will start to see considerable sales increases in the third quarter of the second year because of the fact that all the strategies that have been implemented such as marketing and customer awareness will start taking effect and impact on a greater level in the second year. The first year was all invested in building the foundation and in the second quarter, we will now strengthen the customer base.
In the second third and fourth year, the company has a clear mind and resources for in domestic expansion. The fact is that all the partnerships and alliances have been formulated and all the expertise is available for any expansion with time. All the suppliers, contractors, marketing companies and management and HR personal are available to assist any expansion and the company will be having funds as soon as it expands to another market. The cycle will simply repeat on the entire base that was developed in the first for quarters of the first year.
However, what will change will be the strategies according to the economic and social situations pertaining to different areas. The factors will be the same, but the strategies will differ from region to regions depending on the tastes, specifications and preferences of the customers.
Third and Fourth Year
Nonetheless, during the third and fourth year, the company will have to conduct all the information base development and partnerships it made as in the first year once again but this time, it is not going to be for the domestic market, but, as per the vision and mission of the company, the company wants to go global and be recognized on the global front, therefore, the company will actually need a new base for expanding into the international markets. For every new market, the company will need a new base because in a global setting, economic, legal, demographic, cultural and political forces differ on a larger scale. Therefore, when entering into a new market, a new team will have to repeat the entire process and then they will then spend some time investigating the market and in a year and a half start to expect sales increases in the operations.
The fifth year
The company will now be well settled on the global stage. However, one thing that will enable the company to stay longer and successful on the global stage is the factor of STANDARDIZATION. Until and unless the company keeps its products, services and values standardized on all levels and markets, it will not be able to retain or maintain its essence of service, or the essence of the brand. It will not be able to have a crisp image of its brand throughout the world which is against its mission and vision statement. Therefore, the company will have to have standardized global operations to retain the customer satisfactions and boost their confidence on the service of the company where ever they go and whatever they do. One of the examples of such standardization is McDonalds which has maintained its tastes, products, service and essence through the world and that is one of the reasons why many people use Globalization and McDonaldization interchangeably (Moe, 2007).
Projected Strategies for the Future
Once the company has established and standardized its operations, it will have to come up with brand extensions. Brand extensions can be in the form of a new target market, a new product under the same name or even a new product with a different name. Introducing variants are also a sort of brand extension but it is more like a part of brand extension rather than brand extension itself.
The company might come up with the following options
Use diversified product and brand offerings Expand Starbucks presence in growing markets such as To attract at home coffee preparation market.India and Pacific Rim nations by opening new retail stores.Use strong RD capabilities to create newFind joint venture partners and emphasizeProducts that target 18-24 year olds.Licensing agreements to expand in growing markets.Leverage brand equity to create effective marketingIncrease recycling initiatives to conform to regulationscampaigns to stand out from competition, increase and meet demands of increasingly environmentally aware Customer traffic and drive sales.Customer base.Use RD to develop new products, processes and proceduresReorganization to reduce cost and loss of salesThat use resources more efficiently and reduce operating costs.
Projected outcomes and resources have been yearly discussed in the previous section of the report and for further reference we can use the appendix in which they have been classified as market share, projected budget and sales increases.
Corporate Impact or Outcome if Projected Strategy Fails
The strategy that our team has proposed will actually revive or restart the business from the base level. Therefore, the impact in case of success of the strategy will be seen in all the areas including sales, finances, profits and market share. However, in case the strategy fails, we will see that it will similarly hit all the areas.
As we have projected that for a year and a half, no additional sales will be generated, we see that this is the phase in which the business will be making heavy investments in building the relationship with all the stake holders and carrying out a number of research projects on which further strategies will base. These investments might not necessarily generate revenues for the business in the short run but these expenses are treated as long term strategies for the building a strong base for the business to expand and stand tall in situations of strong and heavy winds because of external competition.
Moreover, another aspect that will be greatly hit will be the expansion plans. If the incremental sales are not up to the market to make it feasible for the company to expand internally, then the companys expansion base will exhaust and it wont be able to extend its roots to the international and global markets.
The costs of the company will rise. There will be huge sunk costs for the company which will go in vain and they will not contribute to any profits or positive cash flows for the company.
However, the way we have planned out our strategy, we see that there are very less chances for the organization to fail following this strategy. The reason is that we are not taking the company to tap into a target market just like that, but, the reason why we have allocated one and a half year for the company to spread and strengthen its roots internally with its product, management, suppliers and marketing managers is the fact that the company understands the market to the fullest and gives the market the level of standardization and the world class quality that will then be unmatched.
Even if there are extra ordinary economic conditions which do not allow the consumers to concentrate to this service due to recession and slumps, even then, our team does not thinks that the one and a half year put on to investments, product design, location selection and relationship building will ever go to waste. The reason behind this optimism is the fact that information collection and strategies based on research are also assets for the company. Information market research and strategic partnerships will tend to be helpful for the company when it comes up with a new strategy to cope with different situations. Half the work will already be done the goals will remain the same, only the focus will have to be changed along with the methodology. Otherwise, the same marketing team, the suppliers and the site contractors will remain the same who will be assigned new tasks and directions to work upon (Wiel, 2008).
Conclusion
Based on the above discussion, we see that the company has a good chance to capture a large market share if it follows the strategy of first building and strengthening itself from the inside and then going out to compete head on with other competitors in the market. The company has the potential and expertise to provide quality products and services and standardization of services will be the key for the companys success in the global arena. The five year plan is as follows in the appendix along with the TWOS table which can be related to the report at several places.
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