Discuss the management of a popular coffee chain Starbucks.
The aim of this report is to analyse the market situation of an international company Starbucks Corporation. This is a Seattle based company which was established in 1972. Starbucks is a premier roaster retailer as well as a provider of speciality coffee in international market. More than 180,000 employees are working in more than 62 countries in the world. The company has 19,767 licensed and operated stores operating internationally (Starbucks.in, 2018). The product mix of this company are basically handcrafted roasted premium tea and coffee including variety of food items as well as beverages. The company focusses to spread its outlet in more countries of the world especially in he developed national. This report discusses the PESTLE analysis of the country so that the company understands the external environment of the country which will give opportunities to this company (Susanty & Kenny, 2015). On the other hand, through Porter’s five Forces will help it to understand the market strength and the presence of the competitors.
Political factors: the political risks in Singapore is very low as it is a democratic country and a single party state. This is why the country has a stable government which aims to increase foreign investment in Singapore (Gov.uk, 2018). Political stability has led to have peace and granted to provide a high standard of living. Hence Starbucks can get an improved business opportunity in this country. The stable government has assented to many international agreements which has created the country a secured place for business (Taecharungroj, 2017). This government of Singapore is also initiated to support the issues of public welfare, society, laws and other supporting factors in the growth of business as well as industries.
Economic factors: the economic factors of Singapore have a vibrant free market economy which has been showing a fast-growing market for the company like Starbucks. In ASEAN the economy of this country is the highest as the per capita income is much higher than other neighbouring countries in Asia. The market is completely corruption free which supports the business of any company (Martinez-Simarro, Devece & Llopis-Albert, 2015). Moreover, Singapore is one of the most competitive countries where the financial as well as legal business framework has supported the business well (Gov.uk, 2018). In order to diversifying the economy of the country the government has invested a lot in the market and provides support various domestic as well as international companies to flourish in the Singaporean market.
Social factors: the country has a traditional family value system like all other Asian countries. Despite the fact that the younger generation has the tendency to follow the western culture which will be good for the company (Lin & Wu, 2014). The people of this country tend to work hard in order to fulfil their materialistic desires. This has resulted in the high availability in the labour market of the country which is much skilled as well as educated. This has helped the country to flourish from the business perspectives along with the productivity of the nation. This is the reason why the business sector expects a high purchasing power from the customers.
Technological factor: the chief reason of the flourishment of this country is the support from the technological advancement. The citizens of the country are the highest user of internet in the region. Excessive use of interest along with other technological advancement has increased the connectivity and supported the communication. The cost as well as time of conducting business has been lowered with the use of technology. The social networking has boosted the purchasing though online market (Lechner & Gudmundsson, 2014). The government has greatly supported the IT infrastructure of the country which has encouraged the MNCs to set up a regional operation in the market of Singapore. Therefore, the company will also get all these benefits which they need from this market.
Legal factors: the legal system of the country is quite praise worthy as well as systematic. The these are quite transparent and quite favourable for the market. Certain regulatory, legal mad business settings are required for supporting the industrial development along with economic growth. Singaporean government has introduced a huge number of e-commerce policies along with E-Commerce programmes in 1996 for developing the e-commerce services in the country (Solberg, 2017). In addition to this, some cross-border e-commerce laws as well as policies are also being introduced. The export and import system of the country is quite liberal for opening the scopes for the foreign investors which will enable Starbucks to gain adequate advantages over its competitors.
Environmental factors: the urban areas of the country suffer from water and air pollution for which the government has made decisions to change the strategy for preventing the inductile pollution in the country. The country has lost more than 30% of its mangroves due to urbanisation and industrialisation (Rahman, 2014). The water resources are also much less in the country than its neighbours. This is one of the major reason of concern for the companies doing business in the country. Despite the facts that the government has implemented various environmental regulations, the company will be able to develop the effective waste management practices in the workplace. With the changing waste management practices, the packaging materials will also be changed due to the company policies to match the regulations.
Competitive Rivalry
In the market of Singapore, Starbucks face a high competition in the market. Through the five forces analysis model, the company can judge the influence of the competitors in the market with their strong hold and presence (Keller, 2017). The market of Singapore has a large number of coffee chain companies which have a strong hold of the market and already gained popularity. The company needs to face strong forces of competition as there are-
These competitors have various size, strategies and specialities. All of these are not only speciality coffee retailers but other fast-food chains operating in the country (Hsu, Fournier & Srinivasan, 2016). The competition is tougher as the customers have the benefit of low switching cost which refers to the advantage of shifting from one brand to the other. Based on this particular analysis, the high competition present in the market of Singapore is one of the top most changes that Starbucks will face.
Bargaining Power of customers:
In the market of Singapore, the company experiences strong force or bargaining power if the buyers.
In the market there are many competitors which gives the customers the scope to switch among the brands more easily as this is quite affordable to do so. The customers also can easily avoid visiting the Starbucks store if they want as there are high number of substitutes for instant beverages along with fast foods.
Bargaining Power of the suppliers:
Starbucks corporation in the market of Singapore will be facing weak force in the bargaining power of the suppliers which means that the suppliers have much less impact on the business of the company. This is due to the factors-
The suppliers of the company do not have any impact as the market has a large number of suppliers that lessens the effects of the single supplier on Starbucks (Heding, Knudtzen & Bjerre, 2015). In addition to this, the company has a policy of diversifying its supply chain which reduces the impact of suppliers on its business despite these suppliers have moderate size in comparison to the supply chain of Starbucks.
Threat of Substitution
As mentioned before, the company has a high number of rivals which compel the company to face the threat substitution. In this five forces model, this force relates to the impact of the substitute goods or services. In this respect, the external factors are-
This substitute aspect indicates that these goods can have a strong potential that may negatively impact the business of the company. The customers who were once loyal to this particular company an easily shift to the substitutes like the beverages from various local restaurants, instant or bottled beverages and goods from the grocery markets (Thompson, 2017). As the cost of switching is quite low, the customers do not need to spend more as switching costs. Moreover, many of these substitutes have low cost which attract the customers which pose challenge for this particular company.
Threat of New Entrants
Starbucks may face moderate force of new entrants though the government of the country does not cause any barrier to enter the market of the country (Ragozzino, Reuer & Trigeorgis, 2016). The company faces some external factors that contribute the threat of the new entrants:
The new entrants have significant but very strong effect on the business of Starbucks. The new entrants may potentially compete with Starbucks due to the moderate cost and supply chain developments. However, the new entrants with no popularity in the international level like Starbucks can find it problematic to compete with this established brand as it is quite costly to develop a strong brand (Palmer, Simmons & Mason, 2014). Therefore, this factor of threat of new entrants can be secondary priority for the company.
The chief issues that the company may face in the market of Singapore are completely related with the competitors and the price of the products of Starbucks. As mentioned before, the market already has many local and national brands to serve speciality coffee service in the market and their popularity is also high. Despite the fact that these companies have different sixe, services and strategies, they can be potential competitor of the company. Moreover, the issue of cannibalism effect can hamper the business of Starbucks. As in the USA, there are numerous Starbucks outlets present in a few minutes’ distance, the business of one store engulfs another. This can be the case of Singapore also.
This is undeniable that the company has a high competitive advantage over its competitors in terms of quality of both its products and services. Singapore can be a potential market for Starbucks but it must have some strategy to enter this market and do business successfully.
First, the company needs to add more values to its value chains through the expansion of website function as the communication tools can link all the stakeholders, like customers, management, employees, suppliers and others.
The company needs to consolidate their public relation function so that it can act more to increase the brand image and reputation than merely being an online business window. Through this the company can build a chat room through which it will be taking feedbacks from their customers to spread fame as well as consolidate the loyalty of the customers.
The idea of the themed stores may be applied in working in the Singaporean market. It is because all the outlets of Starbucks serve the place as corporate business meetings. By leaving extra area for this reasons and creating atmosphere with all essential equipment, it can definitely make extra revenue.
Constant researching about the tastes and expectations of their customers is obviously needed because these matters change with times. Beforehand this company failed to attend the customers with some exotic flavours that are much in demand. Therefore, the diversity must be there in their menu otherwise Starbucks will lose market to its potential rivals.
For a long term effectiveness, the company can focus on franchisee model This will help the company to minimize control on the stores directly. Thus it can concentrate on the quality and the product development process. This will also create the scope for entering the market of Singapore without any restriction.
The company needs to increase more visibility in the local market through the local events, investing in the education of the children and the development of the communities. In Singaporean market, if seen to be true caregiver, will be able to spread like US market.
Finally, the company needs to meet the taste a preference can act local. For doing this, it can introduce alcoholic beverages in the special happy hours in the country. Singapore has a huge alcohol consuming culture like coffee in order to boost the revenue.
Conclusion:
Therefore, it can be concluded that the analysis of porter’s five force and PESTLE analysis have pointed out the potential opportunities for the company in this market of Singapore. Through PESTLE analyses, it can be understood that the company will have a supportive market it enters or do business effectively. The stable political force has direct connection with the economy and legal factors of the country. All these interconnected factors have positive effect on the market. The governmental initiative to support the business in the country and high economic growth have supported both the domestic as well as international Omanis to act freely. the high investment and governmental support in technological advancement can be fruitful for the company where it can utilise the best technological support to flourish its business. However, the five forces have disclosed the fact that the market is full of potential competitors to compete in the Singaporean market. Moreover, the customers can switch their choices to the more affordable products. Despite the fact that the company gets support from the bargaining power of the suppliers, it has many a barrier to survive in the market of Singapore. This is the reason why he company needs to utilise its brand value and strategize its marketing mix in such a way that the company can attract more customers and create a pool of loyal customers in the market of Singapore. In doing so the company needs to identify the strong elements of PESTLE factors so that it can get the best help from each and every way than its competitor in the market of Singapore.
References:
Heding, T., Knudtzen, C.F., & Bjerre, M. (2015). Brand management: Research, theory and practice. Routledge.
Hsu, L., Fournier, S., & Srinivasan, S. (2016). Brand architecture strategy and firm value: how leveraging, separating, and distancing the corporate brand affects risk and returns. Journal of the Academy of Marketing Science, 44(2), pp.261-280.
Hultén, B. (2017). Branding by the five senses: A sensory branding framework. Journal of Brand Strategy, 6(3), pp.281-292.
Keller, K.L. (2017). Managing the growth tradeoff: Challenges and opportunities in luxury branding. In Advances in Luxury Brand Management (pp. 179-198). Palgrave Macmillan, Cham.
Lechner, C., & Gudmundsson, S.V. (2014). Entrepreneurial orientation, firm strategy and small firm performance. International Small Business Journal, 32(1), pp.36-60.
Leduc, C. (2017). “Onward How Starbucks Fought for Its Life without Losing Its Soul” Book Review.
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Martinez-Simarro, D., Devece, C., & Llopis-Albert, C. (2015). How information systems strategy moderates the relationship between business strategy and performance. Journal of Business Research, 68(7), pp.1592-1594.
Palmer, M., Simmons, G., & Mason, K. (2014). Web-based social movements contesting marketing strategy: The mobilisation of multiple actors and rhetorical strategies. Journal of Marketing Management, 30(3-4), pp.383-408.
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Thompson, A. (2017). Starbucks Coffee’s Stakeholders: A CSR Analysis. Panmore Institute.
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