is about Starbucks company. The report
will begin with an introduction to Starbucks, its background, about Starbucks
in Singapore and the various issues. The next sections will consist of the
findings for Starbucks. This will include a detailed analysis of PEST, the
modes of entry for Starbucks and the choice of organisational structure. The
report will end with a conclusion and recommendations.
Starbucks Corporation is an American Company of coffeehouse chain.
Starbucks was first founded in Seattle, Washington United States in 1971 where
the current headquarters is located. The company is founded by Jerry Baldwin,
Zev siege and Gordon Bowker. Starbucks product range from mainly coffee, tea,
smoothie drinks, baked products, sandwiches and even merchandises. As of 2017,
there are a total of 27 339 Starbucks stores worldwide in 6 continents and 76
Starbucks in Singapore
Singapore is the third international country to be
introduced to Starbucks. The first Starbucks store in Singapore was open on 14 December
1996 at Liat Towers along orchard Road. According to the latest data, there are
more than 130 outlets in Singapore. Starbucks has its own Singapore website and
Starbuck’s success is
linked to its effectiveness in addressing the possible external factors which
includes political, economics, socio-culture, technological, environmental and
legal factors. These factors have an influence on Starbucks and it is important
to constantly assess them.
In terms of
political factors, examples include sourcing for their raw materials, the need
to follow the laws and regulations of the countries they are venturing into,
employment law of the different countries, the tax and trade policies.
sources their main product, arabica beans, from 3 regions- Latin America,
Africa and Asia-Pacific. Starbucks process of sourcing raw materials has gained
attentions of Politicians in various countries. As a result, Starbucks has made
it compulsory for the company to source for product while complying to
environmental and social norms. This includes investing in farmer communities to
ensure that supply of coffee is sustainable and of quality. They have also made
sure that their sourcing is accredited by conservation international.
aspect is the necessity to follow the laws and regulations of the countries
they venture into. This is with relevance to the increase in activism and
political awareness. With the changes in these laws and regulation, Starbucks
is required to change to meet these changes effectively.
aspect is the tax policies and trade policies in the various countries. When
venturing into other countries, Starbucks must keep to the various tax and
trade policies implemented in those countries.
another factor that has an influence of Starbucks. Aspects of economic that
affect Starbucks include the rising labour and operational cost, the ongoing
economic recession and currency exchange rate.
labour and operation cost has a direct influence on Starbucks in terms of the
company’s spending. For example, an increase in the price of raw material such
as coffee bean will have direct economic impact on the company as it will
result in rise of operational cost.
is the ongoing economic recession that has a direct effect on Starbucks sales.
Starbucks needs to keep up with the changing trends and adjust themselves
accordingly such as reducing price of items and studying consumer buying power.
However, considering that most consumers has not shifted to alternative cheaper
brands, Starbucks could attempt to work on other aspects to keep customer
aspect would be the currency exchange rate that also affects Starbucks. If the
rate of USD increases, local currencies will tend to buy lesser USD which in
turn causes decline in total revenue.
factor that affects Starbucks in socio-culture. This factor analyses the
various trends and social sides that influences the business and consumers.
Aspects of this factor includes consumer preference which is seem through
growing trend in coffee, changes in lifestyle through the growth in health-conscious
consumers and the change in demographics for consumers.
There is an increasing
demand for speciality coffee which is an opportunity for Starbucks to use the
chance to increase their product value and in turn increase product demand.
However, despite the increased demand for coffee, consumer would prefer more
affordable but quality worthy coffee. This can cause consumers to change
preference in shop making Starbucks lose its consumer base.
trend changes in lifestyle of consumers as there is an increase in ‘health
conscious’ individuals. This is a marketing strategy for Starbucks as they can
take the opportunity to introduce healthy products that will attract relevant
changing demographics is a considerably important factor that Starbucks must
consider for their marketing. As time passes, the previous generations are retiring,
and it is important to market their product according for consumers mostly form
Gen X and Millennials. The older consumer base is turning to more ‘healthy’
drinks and thus the consumer base for these people are decreasing.
is an important factor that can change how a company functions. In this
globalised age, technology plays a big part in a company. Starbucks has used
technology to give the company an edge in competition. One common factor is the introduction of free
Wi-Fi in all Starbucks shops. This increases the number of customers coming
into the shop. Another factor is seen through its partnership with Apple
company. The partnership involves free Wi-Fi access to iTunes Music Store.
factor is the laws and regulations of the country. Starbucks has to make sure that
they follow all laws relating to setting up business and taxes product safety regulations
and other laws.
2. Entry mode
Entry mode is the expansion of a certain company into a new
market in other countries. Starbucks utilises 3 main strategies- joint
ventures, licensing and wholly owned. The tables below show some examples for
Examples of country with joint venture: (figure 1)
Bon Appetit group
Karstadt Quella AG,
Group Vuos& Europastry,
president coffee co.
Maxim’s Cateres Limited
S.C de Mexico S.A de C.
Example of country with license: (figure 2)
Mei Da coffee co
PT Mitra Adiperkasa
Rustan Coffee Corp
M.H Aishata Co. W.L.L
Restaurant Brands Ltd.
Examples of country that are wholly owned: (figure 3)
Entry mode in Singapore:
Being the 3rd country outside North America to be
introduced to Starbucks, the company carefully planned their entry into
singapore. Starbucks chose Singapore as it is known to be more ‘westernised’
compared to other Asian countries. Additionally, Singapore market is well-known
for being a good place for business. Singapore also has a growing ‘coffee
culture’ and people are more prone to buying premium coffee and wants to savour
the taste of coffee. Entry mode of Starbucks in Singapore started through
licensing in the beginning. On June 21 2004, it has been reported that Starbucks
coffee international has acquired its licensed operations from partner Bonvest
Holding Limited. Thus, since 2004, Starbucks coffee Singapore is a wholly owned
subsidiary of Starbucks coffee corporation.
There were several reasons why Starbucks gave licensing to
Bonvest Holdings Limited. Firstly, Bonvest was rather familiar in the food
industry as they had run some businesses. Also, they were more familiar in the
local market, Singapore laws and regulation and other aspects of Singapore
market which meant that they would know best how to grow Starbucks. Also, when Starbucks
first came to Singapore, there were no specific coffee brand that was popular
in Singapore and thus Starbucks had the chance to be at the top.
3. Organisational structure
Vertical differentiation à
decentralisation within the organisation.
Within Starbucks, decision-making is decentralised. Starbucks has stores in 76 countries and each
country has their own culture, and demographics. Through decentralisation, Starbucks
aims to effectively save time, improve communication, decreases delays and
improve performance overall. Through this flexibility given to employees,
improvements have occurred in terms of customer service, product quality and
efficiency of work.
Starbuck’s objective is to make every employee have a sense
of acceptance and give lower level management the autonomy to make decisions.
Starbucks is also supportive of the idea of innovation and therefore, employees
are given the autonomy to share their ideas to make Starbucks a much better
The table below shows the advantages and disadvantages of Starbucks
in implementing a decentralised structure: (figure 4)
people have the power to make decisions, it may lead to confusion or chaos if
not handles properly
communication between employees and higher management
with the right the make decisions may not want to accept other’s decisions
understanding between customers and Starbucks organisation and so decisions
made would be better.
are many people with the ability to make decisions, co-ordination may be a
problem if employees are not able to work together.
differentiation à Worldwide
company uses worldwide matric structure which compromises of functional,
geographical and teams& product based. The table below shows the different
divisions: (figure 5)
It includes the top management of Starbucks. The
top is the CEO of Starbucks followed by the different head of departments of
the company. Departments would include the HR department, Marketing
department and the finance department.
the structures are divided according to the head
for each geographical location. Each geographical location has a head who
sees over their locations and report to the top management. There are 3 main
regions involved- china and Asia pacific, Americas and EMEA (Europe, UK,
Middle East, Russia and Africa)
Product and team division
This is divided according to the product and team
they oversee. This is the lower level management in the hierarchy. This
division is involved in seeing over the different product lines and reports
to their geographical superior.
implemented this structure as it is their goal to improve communication between
upper and lower management and give a bigger sense of belongingness to
employees. It is also an attempt for Starbucks to increase their goal in
diversification and improve relationship with customers.