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    Environmental scan and economic analysis of Starbucks

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    I need to complete an environmental scan and economic analysis on Starbucks, including remote, industry, and operating environments. Please include any changes you think will affect Starbucks in the next 5-10 years. Include the following:

    - Use a macroeconomic forecast of any economic indicators affecting Starbucks in the future which should be incorporated into the strategic planning.

    - What are the non-economic factors in the remote environment and analyze them:

    (1) Social and Cultural
    (2) Political
    (3) Technological
    (4) Demographic

    - From a microeconomic perspective based on the pricing of Starbucks' primary product/service line, and assessment of its cost structure and the market it competes in, complete a competitive analysis of Starbucks.

    - Summarize Starbucks' current situation, including business overview and mission, competitive position, and forces and trends in the industry. Identify 3-6 issues and opportunities that Starbucks should address in their strategic planning.

    - What are some strengths and weaknesses in Starbucks' operating environment that can be leveraged to capitalize on emerging opportunities or minimize the threats you identified earlier.

    - Develop 3-4 strategic long-term objectives that can be measured to determine the strategic plan's success.

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    Solution Preview

    Starbucks is the leading specialty restaurant chain in world. Starbucks is selling coffee and other beverages. But according to Schultz, "We're not just selling a cup of coffee, we are providing an experience." In order to create American coffee enthusiasts with the dedication of their Italian counterparts, Starbucks provides a seductive atmosphere in which to imbibe. Its stores are distinctive and sleek, yet comfortable. Though the sizes of the stores and their formats vary, most are modeled after the Italian coffee bars where regulars sit and drink espresso with their friends. (Starbucks competing in global markets)
    Environmental Analysis of Starbucks
    Environmental analysis is an essential element of formulating strategy. Srategy is about:

    "* Where is the business trying to get to in the long-term (direction)
    * Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)
    * How can the business perform better than the competition in those markets? (advantage)?
    * What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?
    * What external, environmental factors affect the businesses' ability to compete? (environment)?
    * What are the values and expectations of those who have power in and around the business? (stakeholders)"
    As per quickmba, "Strategic planning clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track."

    Environmental analysis tells about the opportunities and threats.

    Macro Economic environment

    As per wikipedia "The gross domestic product (GDP) is one of the measures of national income and input for a given country's economy. GDP is defined as the total cost of all finished goods and services produced within the country in a stipulated period of time (usually a 365-day year). It is sometimes regarded as the sum of profits added at every level of production (the intermediate stages) of all final goods and services produced within a country in a stipulated timeframe, and it is rarely given a monetary value.


    The world economy is affected now by recession and contraction in GDP. This has led to reduced consumer spending which has resulted in contraction of worldwide demand. This may lead to reduction in margins and revenues.

    Another important factor is the Starbucks' dependence on foreign markets. Hence in foreign markets it would be affected by:

    - Economic or political conditions including inflation, recession, interest rate fluctuations and actual or anticipated military or political conflicts;
    - Longer accounts receivable cycles and financial instability among customers;
    - Trade regulations and procedures and actions affecting production, pricing and marketing of products;
    - Differing technology standards or customer requirements
    - Foreign exchange fluctuations

    Political and Legal environment

    World is greatly affected by terrorism in the recent times. This may have adverse affect on the business. Starbucks can be greatly affected by political instabilities of various economies in which it's operating.

    Technological environment

    The industry has got rapid advancement in technologies which can adversely affect the company in terms of huge investments, product acceptance and heightened competition. The product life cycles are becoming shorter and there is an ongoing innovation in the products. This can lead to the threat of reduction in existing product prices and margins.

    Current Strategy

    Strategy of the Starbucks is of product differentiation as it is providing and adding new products / product features to its customer to create a unique image in the minds of consumer. Starbucks started with a single product whole bean coffee in one Seattle store and now it caters numerous variety of beverages and merchandise to its consumers through its 16000 plus stores worldwide.
    As per wikipedia, "Starbucks sells drip brewed ...