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Unde g adua e Disse a ion DEGREE IN BUSINESS ADMINISTRATION & MANAGEMENT Ti le: S a egic Analysis O S a bucks Co ee Company Au ho : Fa ima Talib Supe iso : Elisabe Ga ido FACULTY OF ECONOMICS AND BUSINESS Academic Yea 2019/2020 Au ho : Fa ima Talib Supe iso : Elisabe Ga ido Ti le: S a egic Analysis O S a bucks Co ee Company Name o Deg ee: Business Adminis a ion & Managemen Abs ac : In English This documen con ains an e alua ion o he in e nal and ex e nal business en i onmen o S a bucks Co ee Company. The epo includes an assessmen o s a egic esou ces used by S a bucks o i in a compe i i e en i onmen . The epo will also include he success ac o s o S a bucks and conclude whe he i is he compe i i e ad an age. Mo eo e , he e will be an e alua ion o s a egic op ions o imp o e he pe o mance o S a bucks Co ee Company. The Company uns business in many coun ies o he wo ld and he main poin would be o e alua e s a egies ha can imp o e he ac ual pe o mance. In Spanish Es e documen o con iene una e aluación del en o no come cial in e no y ex e no de S a bucks Co ee Company. El in o me incluye una e aluación de los ecu sos es a égicos u ilizados po S a bucks pa a encaja en un en o no compe i i o. El in o me ambién inclui á los ac o es de éxi o de S a bucks y conclui á si iene la en aja compe i i a. Además, se e alua án las opciones es a égicas pa a mejo a el desempeño de S a bucks Co ee Company. La emp esa ope a en muchos países del mundo y el pun o p incipal se ía e alua es a egias que puedan mejo a el endimien o eal. Con en s 1. In oduc ion 1 2. S a bucks Co ee Company 4 3. The p oduc , indus y and ma ke 6 3.1. De ini ion o he p oduc 6 3.2. De ini ion o he indus y: Abell Analysis 7 3.3. The ma ke : de ini ion and e olu ion 11 4. S a egic analysis 14 4.1. Ex e nal analysis 14 4.1.1. Analysis o he gene al en i onmen -PEST Analysis 14 Poli ical Fac o s 15 En i onmen al Fac o s 15 Technological Fac o s 15 4.1.2. Po e ’s 5 o ces analysis 16 Ba gaining Powe o Supplie s 16 Ba gaining Powe o Buye s 16 Th ea o New En an s 16 Th ea o Subs i u es 17 Ri al y among exis ing compe i o s 17 Conclusions om he Po e analysis 17 4.1.3. Indus y s uc u e 18 4.1.4. Analysis o s a egic g oups 19 4.2. In e nal analysis 21 4.2.1. Mission, ision and alues 21 4.2.2. Value Chain analysis 22 4.2.3. Types o esou ces, capabili ies and co e compe encies 25 4.2.4. VRIO analysis 27 4.3. Conclusions om he s a egic analysis: 29 SWOT and main s a egic lines o ac ion 31 5. Compe i i e s a egies 32 6. Co po a e s a egies 34 7. Co po a e social esponsibili y 35 8. Conclusion 37 9. Bibliog aphy 39 Figu es 1. Numbe o S a bucks s o es wo ldwide 2 2. Impo an e en s in he his o y o S a bucks 4 3. Abell analysis o S a bucks company 9 4. Re enue g ow h o business segmen s 13 5. Map o s a egic g oups 19 Tables 1. Indus y S uc u e 18 2. VRIO analysis o S a bucks 27 3. S a egic al e na i es om SWOT 31 1. In oduc ion Recen ly, he e has been g owing in e es in he co ee indus y. No only does co ee powe you day, bu i also helps powe you coun y’s economy. USA’s Na ional Co ee Associa ion concluded ha he co ee helps communi ies ac oss he coun y in di e en ways om c ea ing jobs o gene a ing ax and om he supe ma ke o he dai y a m.1 Co ee is consumed a all imes o he day and in many cases. An impo an pa o co ee is he social componen o i . Social ac o s also con ibu e o he ac ha co ee is one o he mos widely consumed be e ages in he wo ld oday. People enjoy he as e and e ec s o ca eine, as well as associa ed co ee wi h social in e ac ion. Acco ding o FDF Magazine, S a bucks holds he op posi ion in he co ee indus y.2The e o e, he pu pose o his p ojec is o analyse he s a egy and he sou ces o compe i i e ad an age o he S a bucks Co ee Company and how i has been able o achie e he success o going om a single co ee bean s o e o mo e han 30,000 s o es wo ldwide in 47 yea s. In Figu e 1, we can see he e olu ion o numbe o s o es o S a bucks in he wo ld h oughou he yea s. 1. Associa ion, N., Resou ces, I. and Impac , E. (2019). The Economic Impac o he Co ee Indus y  . [online] Ncausa.o g. A ailable a : h p://www.ncausa.o g/Indus y-Resou ces/Economic-Impac  [Accessed 3 No . 2019]. 2. Rowe, S. (2019). Top 10 co ee companies in he wo ld  . [online] Fd wo ld.com. A ailable a : h ps://www. d wo ld.com/ op10/ op-10-co ee-companies-wo ld [Accessed 3 No . 2019]. 1 Figu e 1: Numbe o S a bucks S o e wo ldwide Sou ce: cnbc.com (2019) The main pu pose o ca y ou he s a egic analysis o S a bucks co ee company is o de e mine he s ong and weak business s a egies o he company and o examine which ac o s pa e way o S a bucks in o being on op o he o he co ee companies. The o he aim o his epo is o sugges s a egic ecommenda ions o he company ha can help i o sus ain hei compe i i e ad an age. Th ough his p ojec he esea che expec s o be able o deepen and specialize in he a ea o in e es , o become amilia wi h he esea ch p ocedu e, da a 2 collec ion, analysis and in e p e a ion and w i ing o a inal wo k and o be able o de end o ally he a gumen s o he wo k done. In o de o de elop he s a egic analysis, his p ojec ollows he adi ional s uc u e p oposed by au ho s such as G an (2016) and Ro hae mel (2019). Fo his eason, he documen is s uc u ed as ollows. The nex sec ion 2 o e s a b ie in oduc ion o he company and i s backg ound. Sec ion 3 desc ibes all he p oduc s ha S a bucks company o e s and also ells us abou he ma ke and he indus y in which he company compe es. Sec ion 4 de elops he s a egic analysis o he i m and i s en i onmen . Fi s , sec ion 4.1 explains he ex e nal analysis o how he en i onmen and he i al y among he compe i o s a ec s he company in decision making p ocess. I also includes an analysis o he s a egic g oup ha he company belongs o. Second, sec ion 4.2 deals wi h he in e nal analysis con aining he alue chain and he VRIO analyse. I also iden i ies he ypes o esou ces S a bucks company uses and i s capabili ies and co e compe ences. Finally, sec ion 4.3 akes in he conclusions om he p e ious subsec ions and summa izes SWOT and sugges s he main s a egic lines o ac ion. Sec ion 5 ou lines he compe i i e s a egy and analyses o wha ex en he company has a sus ainable compe i i e ad an age o e i s compe i o s. Sec ion 6 p o ides de ails abou i s co po a e s a egy. Sec ion 7 explains he social s a egy and ells us abou how he company is aking ac ion o ul ill social co po a e esponsibili y. The inal sec ion p esen s and discusses he conclusions abs ac ed om his s udy. Mo eo e , i also sugges s some ecommenda ions o imp o e he pe o mance o he company based on he p io s a egic analysis. Th oughou his epo , we will alk abou S a bucks globally, howe e we will use he example o US ma ke in o de o speci y S a bucks da a wi h sou ce. 3 2. S a bucks Co ee Company S a bucks was ounded by h ee local businessmen om Sea le, Washing on in 1971 o sell he high quali y whole bean co ee. One o he h ee businessmen and he CEO o S a bucks, Howa d Schul z, who a e isi ing I aly ied o adap he same p inciples in o de o build a s ong ba cul u e and a s ong company and planned o expand he high quali y co ee business wi h he name o S a bucks. The main objec i e o S a bucks is o p o ide high quali y o co ee o i s cus ome and o achie e p oduc inno a ion, e ail expansion and bes cus ome se ice o long e m. Figu e 2: Impo an e en s in he his o y o S a bucks Sou ce: Own elabo a ion 4 S a bucks opened i s i s co ee s o e in Sea le, Washing on. S abucks expanded i s headqua e s in Sea le in 1990 and build a new oas ing plan in Ken , Wash. In he ea ly 90s S a bucks became he i s p i a ely owned US company o o e s ock exchange p og am. In 1997, The S a bucks Founda ion was es ablished bene i ing local li e acy p og am. In he la e 90s S abuck opened i s s o es ou side o No h Ame ica such as in Japan, Singapo e, Thailand, Taiwan, Qa a , CHina, Kuwai , Malaysia and Sou h Ko ea e c. In 2001, S a bucks in oduced e hical co ee sou cing and es ablished S a bucks Co ee T ading Company (SCTC) in Lausanne, Swi ze land. Mo eo e , in he same yea , S abucks launched Wi-Fi in hei s o es. In he ea ly 2000s, S a bucks launched he co ee indus y’s i s pape be e age cup con aining pos consume ecycled ib e. In 2010, S abucks expanded digi al o e ing o i s cus ome s wi h unlimi ed ee wi i. In 2015, S a bucks launched Cold B ew iced co ee and handc a ed smoo hies. Addi ionally, S a bucks achie ed he 99% e hically sou ced co ee. Co ee is one o he apidly g owing indus ies in he wo ld due o i s business s a egy. Th oughou he yea s, S abucks kep expanding i s business and opening new s o es no only in exis ing ma ke s bu also all a ound he Eu ope. S a bucks emains popula o i s co ee because hei co ee buye s indi idually a el o co ee a ms in La in Ame ica, A ica and Asia o selec he bes quali y co ee beans. Mo eo e , S a bucks does no only conside p o i s bu also looks ac o s such as e hical sou cing which helps a me s o a s able u u e and a s able clima e o he wo ld which makes he company en i onmen al iendly. S a bucks picks places o i s s o es in he i s loo o blocks o o ices, unde g ound main en ances and u ban a eas which has p o ed e ec i eness. 5 jus a s op bu as a mini-o ice whe e hey can se up hei lap ops and a end o business while sipping hei a ou i e be e ages. S a bucks appeals o i s cus ome s by wo king o keep i s p oduc s up o da e as s a us symbols. They a e consis en in i s ad e ising, deco and speciali y. Sa bucks ob ain mos o i s e enue om he US ma ke as he company is he leading ma ke playe in he USA wi h a ma ke sha e o 39.8%. On accoun o his, we will use he example o US ma ke o de ail speci ic da a. S a bucks ope a es in 4 ma ke segmen s. Howe e we will dis inguish hem in wo c i e ias. A. Geog aphic c i e ia 1. Ame icas: includes US, Canada and La in Ame ica. The Ame icas segmen is he mos ma u e business and has achie ed signi ican scale as i s headqua e s lies in Sea le, Washing on. 2. China and Asia Paci ic (CAP): I includes China, Ko ea, Singapo e, Thailand, Philippines and Malaysia. 3. Eu ope, Middle Eas and A ica (EMEA): Ope a ed and licensed s o es a e included in CAP and EMEA segmen . Ce ain ma ke s unde his segmen a e ei he unde going ans o ma ion o in s ages o de elopmen o hei business models. This egion includes 37 coun ies, eaching om No way o Oman, Po ugal o Russia. B. Channel c i e ia 1. Channel De elopmen : This segmen includes a a ie y o p oduc s such as oas ed whole bean, ound co ees, be e ages, iced ea and nume ous o he p oduc s which a e sold wo ldwide ou side o hei company ope a ed and licensed s o es. Acco ding o CSIMa ke epo , S a bucks ma ke sha e is 10.5% in Res au an ca ego y and owns 39.8% sha e o US Co eeMa ke ollowed by Dunkin Co ee which owns 29.1%.5 5. S a is a. (2019). Ma ke sha e o majo U.S. co ee chains | S a is a. [online] A ailable a : h ps://www.s a is a.com/s a is ics/250166/ma ke -sha e-o -majo -us-co ee-shops/ [Accessed 7 No . 2019]. 12 I we compa e he esul s o i s compe i o s, S a bucks epo ed To al Re enue inc ease in he 2nd qua e o 2019 by 8.12% yea on yea .The sales g ow h was abo e S a bucks compe i o s a e age e enue g ow h o 4.33% in he same qua e . We can see he compa ison o e enue g ow h o h ee p e ious yea s in he US ma ke wi h his on going yea d i en by p ima ily con ibu ion o Company Owned S o es in Figu e 4. Figu e 4: Re enue g ow h o Business Segmen s Sou ce: Fo bes.com (2019) ❖The highes con ibu o o o al e enue is he company ope a ed s o es and he e has been emendous g ow h o e he yea s. The segmen e enue has inc eased om $16.8 billion in 2016 o $19.7 billion in 2018. The e enue is es ima ed o be a ound $22.9 billion FY 2019. ❖The e has been a good g ow h o he licensed s o es o e he pas ew yea s as he company con inues o add s o es. The e enue in his segmen 13 g ew om $2.2 billion o $2.7 billion in 2018 and p edic ed o be a ound $2.8 billion in FY 2019. ❖The consume packaged goods segmen is expec ed o ha e a all in e enue a e he company’s deal wi h nes le. The e enue is p edic ed o be a ound $1.5 billion in FY 2019. S a bucks is expec ed o ob ain 84% o i s o al e enue om Company Owned S o es.6 4. S a egic Analysis In his sec ion, we a e de eloping he ex e nal and in e nal analysis. These analysis will help us desc ibe he en i onmen in which he company ope a es and hen we will be able o see how S a bucks is using hei esou ces o achie e hei goals. 4.1. Ex e nal Analysis Ex e nal analysis is he analysis o he ex e nal en i onmen and p o ides insigh in o oppo uni ies and h ea s wi hin a business en i onmen . This o ms he inpu o a SWOT analysis wi h which we will conclude ou s a egic analysis sec ion. In ou s udy, ex e nal analysis includes PEST analysis, Po e ’s i e o ces analysis and analysis o s a egic g oups. 4.1.1. PEST analysis PEST analysis is a managemen me hod whe e an o ganiza ion can assess majo ex e nal ac o s ha in luence he company’s policy. In he case o S a bucks, he ac o s ha hold he mos in luence a e poli ical, en i onmen al and echnological ac o s. 6. Fo bes.com. (2019). S a bucks Top Line To G ow By 10% in FY 2019  . [online] A ailable a : h ps://www. o bes.com/si es/g ea specula ions/2019/09/26/s a bucks- op-line- o-g ow-by-10-in- y-2019/#3dc 59b9494  [Accessed 7 No . 2019]. 14 ●Poli ical ac o s S a bucks pay a highe p ices o he co ee i pu chases in hose coun ies whe e high axa ion a e imposed on a me s. As a esul , consume s a e a ec ed by any luc ua ions in axa ion le els in he co ee indus y. While impo ing and expo ing goods, ade issues a ec S a bucks p edominan ly. Changes in go e nmen can change he axa ion and legisla ion so S a bucks should ake cau ion when conside ing new en u es. A high a i imposed by a coun y’s go e nmen can no only esul in an e iciency loss o S a bucks bu also la ge income ans e s can become inconsis en . S a bucks mo ed i s EMEA business headqua e s o London ollowing a ow o e co po a e ax a oidance in 2014. The company s a ed ha his mo e will mean ha hey pay mo e ax in Uk. ●En i onmen al ac o s S a bucks uses plas ic cups o se e i s be e ages and as a consequence he company has achie ed a la ge amoun o c i icism om he en i onmen ac i is s g oups. S a bucks’ p ima y cus ome base is millennial who a e highly conce ned abou he en i onmen and because o his eason S a bucks has in oduced eusable cups o a oid he loss o cus ome base and p omised o inc ease i s cu en usage o eusable cups by 2020 which will be om 1.4% o 2.8% o all o i s cups. ●Technological ac o s S a bucks has been using he echnical de elopmen and is ying o ge he maximum bene i s om he eme gence o mobile wa e. The e olu ion o mobile phones in he o m o apps helps he companies o discoun coupons. The a ailabili y o Wi-Fi in S a bucks' s o es p o ided o he cus ome s o ca y ou hei wo k. This is he bes use o echnological de elopmen o he 15 cus ome s and adds alue o he b and and enhance i s cus ome s’ expe ience. S a bucks has also in oduced new echnological de elopmen s h ough he mobile paymen . 4.1.2. Po e ’s i e o ces analysis Ba gaining powe o supplie s - Low S a bucks a e sou cing i s aw ma e ials by a la ge numbe o supplie s ac oss wo ldwide. S a bucks equi es massi e supply which makes i sup eme o he supplie s. A abic co ee o high al i ude is aded a a p emium which is why i s swi ching cos is high and he es o he co ee beans acqui ed by S a bucks a e easily a ailable. Because o he massi e supply, he supplie s do no a emp ba gain wi h S a bucks o o in luence i s p ices. The e o e, he ba gaining powe o he supplie s agains S a bucks is low. Ba gaining powe o buye s - Low The ba gaining powe o buye s o S a bucks is low. The size o indi idual pu chases is small he e o e single buye s do no hold enough in luence. Apa om i he co ee b and has a di e se cus ome base. The ce ain en i onmen o S a bucks has gained i s b and loyal y and i s cus ome s a e less sensi i e o i s p ices and hey a e willing o pay highe p ices o p emium quali y p oduc s. Th ea o new en an s - High Many small local co ee shops wi h nice ambience and deco has opened and hey a e success ully unning hei businesses. Es ablishing a small and beau i ul ca e does no equi e a huge in es men . Howe e , ea ning a b and loyal y akes ime. Mo eo e cus ome addic ion o S a bucks co ee is making i di icul o new en an s o a ac hem. Since S a bucks mos ly a ge people o high 16 income, small co ee shops wi h nice deco and en i onmen a ac people o all g oups.The e o e, he h ea o new en an s is high o S a bucks. Th ea o subs i u es - High All he p oduc s o e ed by S a bucks ha e subs i u es. S a bucks se es co ee, ea and ood i ems. Nowadays, many people ha e home made ea and co ee machines. The subs i u es o hese be e ages a e juices, so d inks and o he ene gy d inks. Food i ems can also be subs i u ed wi h low cos swi ching p ices. This makes he h ea o subs i u es high o S a bucks. Ri al y among exis ing compe i o s - High The compe i o s o S a bucks a e Dunkin Donu s, McDonalds, Cos a Co ee and many o he small local co ee houses. The compe i o s a e wo king con inuously o inno a e, specialize and come up wi h s a egies o a ac mo e cus ome s. The swi ching cos is e y low o cus ome s o make he compe i ion e en mo e in ense. The p oduc s se ed by S a bucks a e also se ed by i s compe i o s. Thus he compe i i e i al y is e y high o S a bucks. Conclusions om he Po e analysis We conclude om he Po e ’s i e o ces analysis ha he e is a s ong o ce o compe i ion in his indus y. E e y co ee house is ying o be mo e inno a i e and specialize in co ee jus as S a bucks. The mos conce ning hing o S a bucks is he h ea o subs i u es and he company should ocus on maximizing i s s eng hs. The company can implemen s a egies o make i s b and e en mo e s onge . S a bucks can inc ease i s ma ke ing agg essi eness o a ac and e ain mo e cus ome s. 17 4.1.3. Indus y S uc u e Table 1 shows he s uc u e o co ee indus y. The indus y is in a ma u e s age wi h a medium le el o concen a ion. As we ha e de ailed abo e in he Po e ’s analysis ha he compe i ion in his indus y is high wi h low ba ie s o en y. Addi ionally, o se up a small co ee shop does no equi e a la ge amoun o capi al. The e enue ola ili y is medium in his indus y because i depends on he in la ion o he coun y whe e he co ee has been p oduced and impo ed om. The ad anced echnology a ec s he co ee indus y in a way ha he co ee b ands use di e en echnologies o b ew hei co ee and hey also use i in hei co ee shops in he o m o Wi-Fi and apps. Table 1: Indus y S uc u e Li e cycle s age Ma u e Regula ion le el Medium Re enue Vola ili y Medium Technology change Medium Capi al In ensi y Medium Ba ie s o en y Low Indus y Assis ance None Indus y globaliza ion Medium Concen a ion le el Medium Compe i ion le el High Sou ce: IBIS Wo ld Repo (2019) 18 4.1.4. Analysis o s a egic g oups S a egy g oup mapping is used o displaying he compe i i e posi ions ha i als occupy in he indus y. I is impo an o analyse he indus y compe i i e s uc u e in o de o con empla e which companies enjoy s ong ma ke posi ions han o he s. In ou epo we chose wo a iables, a ie y o p oduc s and p ice, o de e mine he posi ions o he companies wi hin he co ee indus y. As we can see in Figu e 5, we di ide he companies in ou s a egic g oups. 1. Big B o he s In his g oup, S a bucks and Cos a Co ee a e included. The p ice o hei p oduc s is highe han he o he s and hey o e qui e a ange o di e en p oduc s. Fo example, a all la e in bo h s o es cos mo e o less 4 CU. Figu e 5: Map o s a egic g oups Sou ce: Own elabo a ion 19 2. Donu ’s lo e In his g oup, we included Dunkin Donu s and Honey Dew Donu s. The headqua e s o bo h companies a e in Ame ica. Bo h companies specialized in Donu s howe e , hey a e ge ing mo e and mo e in ol ed in he co ee business. The p ice o la e in bo h company’s s o es is a ound 3 CU. The p oduc s o e ed by hese wo companies a e limi ed. They ha e mo e op ions in donu s han in co ee. 3. Mcbou In his g oup, we included McDonald’s McCa e and Ca ibou Co ee. These wo a e also Ame ican companies. The p ice o la e o hese companies a e lowe han he companies in o he s a egic g oups. I is mo e a o dable. Ne e heless, McCa e and Ca ibou Co ee o e a wide ange o p oduc s in co ee line and also in ood i em. 4. Local co ee shops Local co ee shops ha e a majo pa in he co ee indus y. They o e hei co ees o en o good quali y o lowe p ices. Mos o hem ha e been unning hei business success ully. They also o e a a ie y o p oduc s in hei shops. The e a e always compe i i e p essu e and d i ing o ces which ad e sely a ec he i ms in s a egic g oups. The e o e, some i ms may y o shi o a mo e a o ably si ua ed g oup. This shi ing is howe e di icul i he mobili y ba ie s o he a ge s a egic g oup a e high. Fo ins ance, i Dunkin Donu s wan s o mo e o Big B o he s’ g oup o S a bucks hey would ha e o imi a e he wo k o ce which is mos likely impossible because wo k o ce is no some hing ha can be imi a ed easily. Mo eo e , hey would ha e o in es mo e o inc ease hei p oduc a ie ies o compe e wi h S a bucks and he e is a p ice di e ence be ween hese wo g oups which makes i di icul o Dunkin Donu s o mo e o he o he g oup. 20 4.2. In e nal Analysis An in e nal analysis highligh s se e al a eas o in e es o unde s and and p io i ize bene i s as compe i i e ad an age. In his sec ion, we will speci ically examine he use ulness o esou ces alongside a company’s p ima y objec i es, mission and s a egies. We will be illus a ing alue chain analysis, ypes o esou ces S a bucks is using, i s capabili ies and i s co e compe ences. Mo eo e , we will de e mine i s compe i i e ad an age h ough VRIO analysis. 4.2.1. Mission, ision and alues The S a bucks mission s a emen is as ollows: “To inspi e and nu u e he human spi i - one pe son, one cup and one neighbo hood a a ime”. The mission s a emen o S a bucks does no say any hing abou business. I s s a emen e ol es a ound i s cus ome s. The company emphasis on he wel a e o he human socie y. I ocuses on e hical sou cing, main aining e hics and compliance in i s business and in es ing mo e in empowe men and o be e he en i onmen . S a bucks has c ea ed a ha monious wo k en i onmen which is ee o disc imina ion and is ying o main ain ha . I s employees wo ked ha d o achie e cus ome sa is ac ion. Values play an impo an ole wi h ega ds o he achie emen o he business goals. He e a e he co e alues o S a bucks: ➢C ea ing a cul u e o wa m h and belonging, whe e e e yone is welcome. ➢Ac ing wi h cou age, challenging he s a us quo and inding new ways o g ow ou company and each o he . ➢Being p esen , connec ing wi h anspa ency, digni y and espec . 21 S ong global p esence Yes Yes Yes Yes Sus ainable compe i i e ad an age Sou ce: own elabo a ion Human esou ce is a s ong and aluable ac o o S a bucks ega ding i s ame globally. No e e y company has he human esou ce simila o S a bucks. Howe e , i does no ensu e he sus ainable compe i i e ad an age o S a bucks because i is no cos ly o imi a e. All co ee shops, whe he small ones o globally expand, can easily ain hei s a wi h a li le in es men . Al hough human esou ces can gi e he company a empo a y compe i i e ad an age un il o he companies s a imi a ing i . Rega ding he s o es appeal, i is aluable because he cus ome s would lo e o go o a co ee shop wi h unique deco s. Howe e i is no a e and i can be imi a ed easily b o he co ee shops. Thus, his ac o p o ides compe i i e pa i y o S a bucks. B and alue is a co e s eng h o any company. I can no be achie ed by imi a ing. A company has o ake a lo o measu emen s in o de o gain b and alue and S a bucks owns i which p o ides he company a sus ainable compe i i e ad an age. S a bucks is highly known o i s cus ome s loyal y. I s cus ome s a e quali y sensi i e and hey do no ca e much abou he high p ices as long as hey ge good cus ome se ice which is a e and i is impossible o imi a e. To gain someone’s loyal y is ha d o achie e. The e o e, his ac o also helps he company ge a sus ainable compe i i e ad an age. 28 S abucks has aken ce ain measu emen o be socially esponsible by in oducing ecycled pape cups, minimizing i s en i onmen al oo p in and by add essing clima e change challenge. S a bucks has gained an image o socially esponsible globally which is no easy o imi a e and i helps S a bucks o achie e sus ainable compe i i e ad an age. S a bucks has expanded globally wi h he p esence o i s mo e han 30,000 s o es all o e he wo ld. I is no an easy landma k o achie e. E e y pe son om e e y co ne knows he S a bucks co ee, no ma e i he pe son goes o i s s o es o a co ee bu all o hem know i s name. S a bucks has no s opped g owing. I s inancial s a emen s epo has s a ed ha app oxima ely 2000 new s o es will be opened in 2020.8This shows ha S a bucks has sus ainable compe i i e ad an age wi h he help o i s expansion ac o . 4.2.5. Conclusion om s a egic analysis: SWOT analysis ❏S eng hs ●S a bucks has a signi ican geog aphical p esence ac oss he globe and main ains high ma ke sha e in he co ee indus y. ●S a bucks has implemen ed loyal y based p og am o d i e loyal y wi h i s ewa ds p og ams and S a bucks ca d. These p og ams p o ide con enience and inc ease equency o isi s by ca dholde s. ●The e is a huge mobili y ba ie because a new company would need a la ge amoun o in es men o en e in o he s a egic g oup whe e S a bucks compe es. ●S a bucks’ human capi al is one o i s main s eng hs which ansla ed in o g ea cus ome se ice ha has helped hem gain popula i y and loyal y. 8. In es o .s a bucks.com. (2019). S a bucks Repo s Q4 and Full Yea Fiscal 2019 Resul s  . [online] A ailable a : h ps://in es o .s a bucks.com/p ess- eleases/ inancial- eleases/p ess- elease-de ails/2019/S a bucks- Repo s-Q4-and-Full-Yea -Fiscal-2019-Resul s/de aul .aspx [Accessed 31 Dec. 2019]. 29 ●S a bucks is e y well known o i s b and alue. I has buil i s epu a ion by c ea ing a iendly en i onmen o wa m h and belonging whe e e e yone is welcome. ●S abucks has been including in i s menu heal h conscious p oduc s ha a ac s die conscious consume s. No many o he co ee shops o e hese p oduc s which makes S a bucks unique. ❏Weaknesses ●S a bucks en i onmen condi ion can easily be imi a ed by i s compe i o s. Mo eo e , small local compe i o s could de elop be e ages ha a e no he same bu simila o S a bucks’ p oduc s. ●The high p ices o i s p oduc s can pose a weakness o i success whe e i s cus ome s a e mo e sensi i e o p ices. ●Because o i s good image o social co po a e esponsibili y, S a bucks has o main ain igh con ol o e i s labo p ac ices which needs capi al and human esou ces. ❏Oppo uni ies ●S a bucks has g ea po en ial and is capable o u he expanding in o many eme ging and de eloping ma ke s. They can le e age hei expe ience, size, e iciencies and inancial powe o make new ma ke sha e. ●Co ee cul u e has been g owing e e yday. Co ee is an excuse o people o ge oge he and enjoy each o he ’s company in a nice ambiance ha S a bucks p o ides. ●S a bucks can en e in o a new ma ke o packaged co ee and p oduc s. ❏Th ea s ●S a bucks yield mos o i s e enue om he US ma ke which makes i mo e sensi i e o p ospec s o US economy and g ow h. 30 ●The bigges ea ha S a bucks ace is he g owing compe i ion ha pu s p essu e on i om compe i o s like Dunkin’ Donu s, McDonalds and Cos a co ee especially in he US ma ke . ●The e has been signi ican luc ua ions in he labo cos s and he p ices o high quali y co ee beans which S a bucks canno con ol and i ’s a possible h ea o i s e enues. ●The ules and egula ions in mos coun ies whe e S a bucks ope a es migh pose h ea o S a bucks as i di ec ly a ec s i s p ima y ac i i ies. ●All he p oduc s o e ed by S a bucks ha e subs i u es which a e juices, so d inks and ea. People ha e home made co ee machines and hei p oduc s can be subs i u ed wi h low swi ching cos s by i s buye s. Table 3: S a egic al e na i es om SWOT ❖S eng hs 1. B and image 2. Loyal cus ome s 3. Human and inancial capi al ❖Oppo uni ies 1. Fu he expansion 2. Di e si ica ion o he p oduc s ❖Th ea s 1. Subs i u es 2. Fluc ua ions in p ices 3. G owing compe i ion 4. Dependence on US economy & g ow h ❖Weaknesses 1. High p ices 2. Imi a ion by o he i ms 3. Main ain con ol o e labo p ac ices S a egic Al e na i es: 1. Conside p icing s a egies o a ac mo e cus ome s and add ess he compe i ion and subs i u es h ea . (W1,T3,T1) 2. Expand o new ma ke s wi h he di e si ica ion o i s p oduc s and educe he dependency on US g ow h. (T4,O1,O2) 3. Implemen a hedging s a egy o a oid luc ua ion. (T2,S3) 4. In es in human capi al and loyal cus ome s o ackle he imi a ion p oblem. (S2,S3,W3) 31 Sou ce: Own elabo a ion 5. Compe i i e s a egy Compe i i e s a egy is he means by which he companies inc ease p o i abili y. The e a e h ee ypes o compe i i e s a egies: low cos s a egy, di e en ia ion s a egy and ocus s a egy. S a bucks has de eloped di e en ia ion s a egy. S a bucks keeps cus ome s on he cen e o a en ion. The company is known o making necessa y changes in o de o mee cus ome s’ needs and wishes. The di e en ia ion s a egy can be achie ed in di e en ways. I a ies om se ice o se ice, p oduc o p oduc and indus y o indus y. The di e en ia ion could be achie ed om quali y, unc ionali y, du abili y and in some ways cus ome suppo and b and’s image. The p oduc s o S a bucks a e di e en ia ed on he basis o quali y and he company p o ides an en i ely di e en cus ome expe ience. Mo eo e , S a bucks has de eloped a b and image which is also makes i di e en om o he s and makes i s b ands be e han he compe i o s. In case o quali y based di e en ia ion, he company only se es p emium quali y co ee o he co ee d inke s which pe mi s he company o ix a highe p ice. S a bucks does no comp omise in e ms o he quali y o i s co ee beans. The A abica beans ha he company uses is di e en om he egula ones. A abica beans ha e an exquisi e la o because hey a e ound a highe al i udes whe e he beans a e dense . The la o o hese dense beans a e ound in e e y cup o S a bucks. The di e en ia ion no only comes om he quali y o he beans bu also he p epa a ion is a huge pa o i s la o . S a bucks oas s i s co ee beans deepe o b ing ou he la o . I p oduces sa is ac ion and supe io as e. S a bucks ends o do e e y hing in i s powe o dis inguish i s quali y and p oduc s om i s compe i o s. This p o ides a sus ainable compe i i e ad an age 32 o S a bucks ha show in he o m o be e sales, e enues and la ge ma ke sha e. Howe e , he quali y o he p oduc is no enough solely o achie e di e en ia ion om i s compe i o s. In he case o S a bucks, i is backed up wi h he b and image. S abucks has always ocused on e hics inside and ou side o he company. The company sou ces 99% o i s beans e hically which is good o i s ma ke ing oo. The company is known o i s iendly en i onmen which helps c ea e a good cus ome expe ience. No all companies can p o ide good cus ome expe ience which is why S a bucks has p o ed ha cus ome expe ience can be a sou ce o sus ainable compe i i e ad an age. Up un il now S a bucks has opened mo e han 30.000 s o es globally. All o heses s o es p o ide a nice ambiance ha p o ides cus ome s a elie om hei daily s ess. To c ea e an e hical image, S a bucks wo ks ha d on esponsible sou cing and helps he a me s and communi y h ough i s CSR s a egy which we will be de eloping in he las sec ion. 33 6. Co po a e s a egy S a bucks co po a e le el s a egies a e he main ac o s ha led o S a bucks success. Acco ding o B adley (2016), “co po a e le el s a egy conce ned wi h he s a egic decisions a business makes ha a ec he en i e o ganiza ion. Ve ical, ho izon al in eg a ion, di e si ica ion and in e na ionaliza ion a e conside ed pa o co po a e le el s a egy. ❏Ve ical in eg a ion S a bucks buys and oas s and sells all o i s own co ee beans, a he han ou sou cing any hing in he p ocess. This is an example o a highly backwa d e ical in eg a ion. Ra he han buying he co ee al eady oas ed and made, hey do i hemsel es o keep cos s low and p ocess wi hin he managed o e sigh . S a bucks compe i i e ad an age also comes om he quali y o i s beans and how hey a e oas ed because his is bo h a e and aluable. The company akes ull con ol o he oas ing p ocess o make su e ha beans a e oas ed a a high quali y. I has company owned s o es and i is no e ically in eg a ed in dis ibu ion and wa ehouses. S a bucks e ically in eg a es in e ail because o i s main s a egy line o selling a unique S a bucks expe ience. Mo eo e , S a bucks’ aim o c ea e a s imula ing, in i ing and consis en en i onmen ha e oked he omance o co ee which shows he company’s passion o co ee. ❏Ho izon al in eg a ion Tazo, a ea company was ounded in 1994 and was acqui ed by S a bucks in 1999 o $8.1 million. Howe e , Tazo ea was sold o Unile e o $384 million in 2017.9S a bucks acqui ed i s home own i al Sea le’s Co ee Company om i s pa en company , which included 129 Sea les’ bes co ee shops and 21 To e azione co ee shops, o $72 million in 2003.10 9. Food Di e. (2020). Unile e acqui es Tazo ea o $384M om S a bucks  . [online] A ailable a : h ps://www. ooddi e.com/news/unile e -acqui es- azo- ea- o -384m- om-s a bucks/509987/ [Accessed 9 Jan. 2020] . 10. Ny imes.com. (2020). COMPANY NEWS; STARBUCKS AGREES TO ACQUIRE SEATTLE COFFEE COMPANY  . [online] A ailable a : h ps://www.ny imes.com/2003/04/17/business/company-news-s a bucks-ag ees- o-acqui e-sea le-co ee-company.h ml [Accessed 9 Jan. 2020].  34 S a bucks acqui ed E hos wa e in 2005 in an e o o aise awa eness abou wa e access issues o people in de eloping coun ies.11 Since hen S a bucks has in es ed mo e han $12 million in wa e , sani a ion and hygiene educa ion in co ee g owing coun ies in A ica, Indonesia and La in Ame ica. Mo eo e , S a bucks acqui ed E olu ion F esh in 2011 o $30 million. E olu ion F esh ui smoo hies and packaged yogu p oduc s a e a ailable a S a bucks s o es.12 In 1993, S a bucks o med an alliance wi h Ba nes and Noble books o es o o e co ee wi hin he book s o e ha p o ided p o i o bo h pa ies. The company made an alliance wi h Pepsico o dis ibu e “F apuccino eady o d ink co ee” in 1996. S a bucks’ pa ne ship wi h K a oods is an example o an alliance ha did no wo k ou . They o med an alliance in 1998 o dis ibu e S a bucks packaged co ee in supe ma ke s. S a bucks claimed ha he K a ood did no do a good enough job o ma ke ing i s p oduc s.13 S a bucks made a pa ne ship wi h Apple on selling music as a pa o cus ome expe ience in 2006. ❏Di e si ica ion S a bucks was ini ially c ea ed o o e high quali y co ee be e ages, he i m has con inued o expand and di e si y i s b and in an e o o gain a compe i i e edge. In addi ion o co ee, he i m has been adding new snacks and has in oduced E olu ion F esh p oduc s by making new alliances h oughou he yea s. As a esul o making new alliances, S a bucks has in oduced new p oduc s alongside expanding o ma ke s ou side Ame ican ma ke whe e i s headqua e s a e loca ed. S a bucks’s di e si ica ion mos ly alls wi hin he ealm 11. S o ies.s a bucks.com. (2020). S a bucks  . [online] A ailable a : h ps://s o ies.s a bucks.com/s o ies/2015/s a bucks- inds-a-new-sou ce- o -e hos-wa e -ou side-cali o nia/ [Accessed 9 Jan. 2020]. 12. CNNMoney. (2020). S a bucks buys juice make E olu ion F esh  . [online] A ailable a : h ps://money.cnn.com/2011/11/10/news/companies/s a bucks_juice_e olu ion_ esh/index.h m?iid=EAL [Accessed 9 Jan. 2020]. 13. Capi al Raising and Business Exi s in Aus alia. (2020). S a egic Alliances in Ac ion: S a bucks  . [online] A ailable a : h p://www.benkille by.com/snippe s/s a egic-alliances-in-ac ion-s a bucks/ [Accessed 9 Jan. 2020]. 34 o he e ail ood and be e age indus y and hence, would likely be conside ed a single-business i m. ❏In e na ionaliza ion Un il 1995 S a bucks opened 700 s o es ac oss he US and began explo ing o eign oppo uni ies by opening opening i s e y i s s o e in Japan ou side o he US. S a bucks es ablished a join en u e wi h a Japanese local e aile and i was cha ged wi h aking o e esponsibili y o g owing S a bucks’ business in Japan. By he end o 2009, he company had mo e han 800 s o es and a p o i able business in Japan. A e Japan, S a bucks had con inued g owing and in es ing in o eign coun ies. A he end o he 1990s he company opened s o es in Taiwan, China, Singapo e, Thailand, Sou h Ko ea, Malaysia and New Zealand. In Asia, S a bucks ga e license o i s es ablishmen s o local ope a o s in exchange o ini ial licensing ees and oyal ies on s o e e enues. By 2002, S a bucks was pu suing an agg essi e expansion in mainland Eu ope. S a bucks chose Swi ze land as i s i s en y poin and la e on opened new s o es in o he Eu opean coun ies.14 7. Co po a e social esponsibili y S a bucks’ social esponsibili y s a egy is based on h ee pilla s: s eng hening communi y, e hical sou cing and he en i onmen . Communi y se ice is a pa o i s he i age and i s pa ne s con ibu ed mo e han 66,000 hou s o se ice o he neighbou hoods hey se e. Mo e han 10 million meals ha e been sha ed h ough i s FoodSha e p og am including 7.4 million meals in 2018. S a bucks has pledged o hi e a leas 10,000 e e ans and mili a y 14. S a bucks Co ee Company. (2020). S a bucks Company Timeline  . [online] A ailable a : 35 h ps://www.s a bucks.com/abou -us/company-in o ma ion/s a bucks-company- imeline [Accessed 9 Jan. 2020]. by 2018 and ocuses on di e si y and inclusion in he wo kplace. The company also p o ides aining oppo uni ies o you h in hei communi ies and has de eloped he S a bucks Founda ion whose goal is o s eng hen hose communi ies u he . S a bucks de elops communi y s o es ha pa ne wi h local nonp o i s. The nonp o i s, hese s o es wo ks wi h, o e se ices aimed 5o mee he needs o he communi ies hey a e loca ed in. S a bucks, in e u n, dona es $0.05 o $0.15 pe ansac ion o he nonp o i pa ne .15 S a bucks pu chases i s p oduc s h ough e hical sou cing. The company makes su e ha i s co ee, ea and o he manu ac u ed goods a e esponsibly and e hically p oduced and pu chased. S a bucks’ co ee was e i ied as e hically sou ced unde C.A.F.E (Co ee and Fa me Equi y) in 2018 o he ou h ime consecu i ely. Clima e change ep esen s signi ican immedia e and long e m isks o co ee a me s a ound he wo ld. The e o e, S a bucks is in es ing in inno a ion o o e a me s new clima e esilien co ee ee a ie ies and suppo co ee a ming communi ies h ough i s Global Fa me Fund o make su e a me s ha e access o low in e es inancing ha will help hem ein es in hei a ms. S a bucks has aken a comp ehensi e app oach o educe i s en i onmen al impac . They ha e commi ed o ecycling and conse ing wa e and ene gy o add ess clima e change on a global le el. The company is wo king on doubling hei use o ecycled cups by 2022. In 2018, 1.3% o cus ome s in company ope a ed s o es in he US, Canada and EMEA ecei ed a discoun o b inging hei own mug o umble , sa ing mo e han 42 million disposable cups.15 They a e con inuing o ind new ways o encou age cus ome adop ion o eusables. 36