Introduction

ThepurposeofthisreportistoStrategicallyAnalyzethreecompaniesofthreedifferent
industriesinordertodevelopadeeperunderstandingofStrategiesinrelationtodifferent
factors affecting both internally and externally, followed by companies and its
importance.
Theobjectiveofthereportistostudyvariousconceptsofacompanysstrategies.These
concepts would include Resource Based View, Value Chain Analysis, External
EnvironmentAnalysisbyPESTELandPortersfiveforcesAnalysis.Thesereadingswill
help to identify the crucial resources, its capabilities, its core competences, their
performancedrivingforcesandtheirgenericaswellasgrandstrategies.Theanalysis
foundcreatedanunderstandingofthereasonsofapplicationofanystrategyandtheir
outcomes.Alsohowawelldefinedandefficientlyexecutedstrategygivesacompany
competitiveadvantageoverthecompetitorsintheindustry.
Thelearningachievedfromthisreportwasthatstrategicmanagementisanimportant
aspectofanybusinessplanthatdevelopsarelationbetweenthecompanysstrategiesand
itsvisionandmissionstatements.Strategicapproachwasthusfoundofhighrelevancein
ordertosustainthisdynamicmarketscenariotomakeaprofitableventure.

Companies
ThreeIndustries(companies)selected

Food&Beverage:StarbucksCorporation.
Electronics:AppleInc.
AcademicInstitution:VanderbiltUniversity.

Starbucks Corporation, an American company founded in 1971 in Seattle, WA, is a

premier roaster, marketer and retailer of specialty coffee around world. Starbucks has
about 182,000 employees across 19,767 company operated & licensed stores in 62
countries. Their product mix includes roasted and handcrafted high- quality/premium
priced coffees, tea, a variety of fresh food items and other beverages. They also sell a
variety of coffee and tea products and license their trademarks through other channels
such as licensed stores, grocery and national foodservice bucks also markets its products
mix with other brand names within its portfolio of companies, which include Teavana,
Tazo, Seattles Best Coffee, Starbucks VIA, Starbucks Refreshers, Evolution Fresh, La
Boulange and Verismo. Starbucks had total revenue of $14.89 billion as of 2013.

Strategy Evolution Of Concept And Definitions

Introduction
Great strategies are worth nothing if they cannot be implemented (Okumus and Roper
1999). It can be extended to say that better to implement effectively a second grade
strategy than to ruin a first class strategy by ineffective implementation. Less than 50% of

formulated strategies get implemented (Mintzberg 1994; Miller 2002; Hambrick and
Canella 1989). Every failure of implementation is a failure of formulation.
The utility of any tool lies in its effective usage and so is the case with strategy. Strategy
is the instrument through which a firm attempts to exploit opportunities available in the
business environment. The performance of a firm is a function of how effective it is in
converting a plan into action and executing it. Thus implementation is the key to
performance, given an appropriate strategy.
In literature, implementation has been defined as the process by which strategies and
policies are put into action through the development of programs, budgets and
procedures (Wheelan and Hunger pp15). This involves the design or adjustment of the
organization through which the administration of the enterprise occurs. This includes
changes to existing roles of people, their reporting relationships, their evaluation and
control mechanisms and the actual flow of data and information through the
communication channels which support the enterprise (Chandler 1962; Hrebiniak and
Joyce 2005).
Evolution
The field of Strategic management has grown in the last thirty five years developing into
a discipline in its own right. Borrowing extensively from Economics and Social sciences,
it is still fragmented by the presence of number of distinct schools of thought, diversity in
underlying theoretical dimensions and lack of disciplined methodology. The
fragmentation is due to high degree of task uncertainty and lack of coordination in
research a result of lack of uniformity and focus between the strategy field, its base
disciplines and practitioners (Elfring and Voelberda 2001 pp 11).
Strategy as a field of enquiry developed from a practical need to understand reasons for
success and failure among organizations. This led to a focus on overall performance and
on the top management. The works of Chandler (1962) and Andrews (1971) created a
view that strategy is made at the top and executed at the bottom, further reinforcing the
fields focus on the top management while implementation was seen as secondary (Floyd
and Woolridge 1996)
The emergence of corporate planning in the 1970s further heightened the disconnect
between formulation and implementation, as operating decisions were made as if plans
did not exist. Key insight was that plans were ineffective and line managers needed to be
involved in the process (Floyd and Woolridge 2000).The development of analytical tools
like BCG, PIMS further reinforced the notion that strategy was an exclusive top
management function. The development of the strategic management paradigm
delineated the formulation and implementation components of strategy, identified roles
for all mangers except the lowest operating level in the formulation process.
Implementation was design of standards, measures, incentives, rewards, penalties, and
controls (Floyd and Woolridge 1996). Managers were thought to be more as obstacles. It
was Mintzberg and Waters (1985) whose view that strategy is a pattern in a stream of
decisions, that expanded the role of other than the top management in strategy making
since strategies could be emergent. Burgelman (1983) integrated both the top down and
bottom up view of strategy by introducing the concept of autonomous development of
strategy in addition to the normal intended strategy, reinforcing the observations of

Bower(1970) who stated that the top management had little control on what projects get
pushed for approval.
Despite these studies; till the 1990s strategy formulation and implementation were seen
as separate items, with a distinct focus on strategizing (achieving the fit between the
environment and the plan) while effective implementation of it was taken as granted.
Content research dominated. The works of Mintzberg (1978) Miller and Frieson (1980),
Pettigrew (1985) brought into focus the gaps between formulation and implementation.
This brought into prominence the research stream concentrating on study of change. This
also challenged the paradigm of explicit formulation and implementation, as strategies
could now be emergent, unrealized. It also strengthened the tiny but growing band of
process researchers who were looking at the role of power, culture as shapers of strategy
outcomes.
Research on strategy implementation, though neglected, was taken by few researchers in
form of development of frameworks (Hrebiniak and Joyce 2005; Bourgeois and Brodwin
1984; Skivington and Daft 1991; Miller 1997; Okumus 2001; Joyce and Hrebiniak 2005)
and in the form of evaluation of individual factors affecting the implementation process
like- the interests of middle managers (Guth and Macmillan 1986) or the usage of
implementation tactics (Nutt 1987).
The present context for strategic management has been described as hypercompetitive
(Daveni 1994) which ensures that sustained advantage is transitory. Under these
circumstances, strategy and form of organization need to be continuously assessed for
appropriateness. Thus fast paced change makes strategy dynamic in character. Learning
has become a key attribute along with organizing of knowledge resources. Under such
circumstances, strategy formulation and implementation are viewed as intertwined sub
processes in the strategy process.

RESOURCEBASEDVIEW

Resource Based View

Human Resource
Financial
Technical
Capabilities
Core Competencies
Competitive Advantage
Superior Performance

StarbucksCorporation:
After an evaluation of external market and the making of industrylevel decisions,
internal Strengths and weaknesses need to be considered. The firms distinctive
competencesarebuiltfromtangibleandintangibleassets,andorganizationalcapabilities.
Thetangibleassetsaremosteasytoidentifyastheyincludefinancialresources,raw
materials, production facilities and real estate. Starbucks purchases only the highest
qualityofcoffeebeansfromidealcoffeeproducingclimates.Throughoutthepromotion
ofequitablerelationshipswithfarmers,workersandcommunitiesaswellasprotectionof
theenvironment,thefirmhasimproveditsmarketingabilityandupgradeditssupply
chainthatturnsbasicresourcetoanadvantageformeetingcustomerexpectationsof
quality roastedcoffee.Thismovesecures thecompanys supplylevel.Furthermoreit
makesStarbuckspriceandqualitymorecompetitive(Differentiationstrategy)inthenew
marketsandworldwidecoffeeindustry(gsb.stanford.edu).
Starbucksuniquestrategyofkeylocationshelpsittoattractforeigners.Thispromotes
Starbucksbrandimageandraisesprominence.Thismakesforeignersfamiliarwiththe
service,qualityandproductsthatStarbucksisoffering.Theintangibleresourcesarethe
brand name, reputation, knowledge, experience, etc. The basic ideas for Starbucks
creationweretakenfromItaliancoffeeshops,whereMr.Schultz(StarbucksCEO)learnt
abouttheItaliancultureofcoffeedrinking,whichhadnotexistedintheUSbefore.This
knowledgeandtheexperiencegainedthroughoutthedecadesintheUSmarketprovided
Starbucks with the unique knowhow, which raises competitiveness in international
markets.
TheStarbucksbrandhaselementsofuniquenessanddifferentiationthatareessentialto
createpositiveassociationsinthemindsoftheconsumers(Pereraetal,2009).Thislevel
ofbrandinimitabilityandqualityisvitalforinternationalbuyers.Starbucksbrandname
is recognizableinmostcountriesaroundtheworld;thismakescustomerspayahigher
price forthebrandname.Starbuckshasjoinedthebigleagueofnonamelogo,which
couldassistitinexpansionintothecountrieswhichnotonlyhavedifferentlanguagesbut
differentwritingse.g.Arabic(Guardian.co.uk).Starbucksbeingoneofthecompaniesto
havethelowestrateforemployeeturnoveralsohasahighemployeesatisfactionquota.
Thismakesinternationalrecruitmentmucheasierastheyareseenasattractivetowork
for(Money.cnn.com). Starbuckshasareputationforbeingagoodsociallyresponsible
firm. It is ecofriendly, and encourages customers to use recyclable cups. It has
incorporatedgreendesignsinitsstoresandhelpedfarmersreducecarbonemissions.All
these build up its brand image throughout the world and increases customer loyalty
aroundtheglobe(Starbucks.com).

Value chain analysis

Starbucks Corporation:
Primary activities
Inbound logistics Sourcing coffee from diverse coffee beans producers with whom they
have great relationships and built up efficient supply chain management system.
Operations They have operation in 60 countries with their stores being modeled on
company operated stores and licensed stores.
Outbound logistics Most of its product mix are sold in-store and some through large
box retailers. Payment around source through point of sale, prepaid Starbucks Cards and
mobile payments.
Marketing and Sales Traditionally, investment in marketing activities have not be
significant and relied mainly on the growing reputation of premium quality product mix
and superior customer services to give the Starbucks Experience to drive customers to
their stores and products.
Service - Starbucks has a reputation for providing supreme level of customer services to
their consumers.
Support activities
Firm Infrastructure. They have well designed, aesthetically pleasing stores. They have
efficient level of finance, accounting and legal departments to support the firms
infrastructure.
Human Resource Management Great benefits, employee empowerment and amazing
corporate culture makes Starbucks drive efficient management of human capital.
Technology development Investments in innovative technologies like the well like
mobile app.
Procurement Starbucks procures its products from a diverse group of supplier and has
fixed contracts with some of the suppliers.

External Factors
Starbucks Corporation:
PESTEL analysis

IMPACTSOFPOLITICALFACTORSONSTARBUCKS
The main political factor is about sourcing the raw materials. This has gathered a
lot of the attention from politicians in the West and from the source countries.
For this reason, the company wants to adhere to social and environmental norms.
It is willing to follow the sourcing strategies. It gives importance to fair trade
practices.
Another impact is the need to follow the laws and regulations in the countries
from where Starbucks buys the raw materials. Activism and increased political
awareness in developing countries have made his essential.
The regulatory pressures within the home market in the US are also a factor.
Multinationals based in the US are now subject to greater scrutiny of the business
processes. The company must monitor political stability within the country as
well.
Some other factors to consider are:
Tax policy
Employment laws

IMPACTSOFECONOMICFACTORSONSTARBUCKS

The ongoing global economic recession is the prime external economic driver for
Starbucks. As already mentioned, this factor dented the profitability of
Starbucks. This has convinced buyers to shift to cheaper alternatives. As they did
not quit buying coffee, Starbucks should seek an opportunity here.
The company has to deal with rising labor and operational costs. The inflationary
environment and falling profitability is causing a lot of stress.
Some other economic factors which can affect Starbucks are:
Local currency Exchange Rates
Local economic environment in different Markets
Taxation level
IMPACTSOFSOCIOCULTURALFACTORSONSTARBUCKS
As already stated, Starbucks can offer cheaper products but it might have to
sacrifice the quality. This is the main socio-cultural challenge that the start-up
faces. It will expand consumer base to include the buyers from the lower and the
middle-income tiers.
The green and ethical chic consumers are also concerning. They fret about

social and environmental costs of the brands. Starbucks has to be aware of this
trend.
The baby boomer generation is retiring. This means spending by older
consumers will decrease. Now, Starbucks will have to tap the Gen X and the
Millennials as customers.
Other socio-cultural factors to focus on are:
Changing family patterns in USA and Europe
Consumer preferences
Changing work patterns
Changes in lifestyles of population
The level of education of the population in local Markets
Changing values among population
IMPACTSOFTECHNOLOGICALFACTORSONSTARBUCKS
Starbucks is in a good position to enjoy benefits of the emerging mobile wave. Its
partnership with Apple to bring app based discount coupons is helping it ride the
mobile wave easily.

The company introduced Wi-Fi capabilities in its outlets already. Internet is

important to the consumers. They can now surf the web and do work while
sipping Starbucks coffee. This is an added value to the brand. It enhances the
overall consumer experience.
Starbucks is also enabling mobile payments. They are testing this in pilot
locations in the US.
Some other technological factors to keep in mind are:
Emergence of innovative technology
Biotechnological developments
Developments in agriculture
IMPACTSOFENVIRONMENTALFACTORSONSTARBUCKS

Many Starbucks business practices concern activists and international advocacy

groups. Even the consumers have expressed issues. So, the company should take
these into account to continue holding consumers trust.
Some of the other environmental factors Starbucks should worry about are:
Environmental rules and regulations
Environmental disasters in countries which produce coffee beans
Global warming and other environmental issues in a global level

IMPACTSOFLEGALFACTORSONSTARBUCKS
Starbucks must ensure that it does not violate any laws and regulations in the

home Market and countries from where they buy raw materials.
It should also stay alert about introduction of caffeine production and
consumption related policies and regulations by health authorities.
Others factors that might affect the company are:
Introduction of stricter customs and Trade regulations
Licensing regulations related to the industry.
The PESTLE analysis above proves that Starbucks has a quite stable
external environment. The key reason behind this might be because it
operates in the Food and Beverages industry. This means consumers might
reduce consumption partially but will not stop buying completely.
So, as recession is the most important factor, Starbucks has to lower costs and
increase the value. This way it can retain its consumer base and also gain
consumer loyalty.
Porters Five Forces Analysis
Threat of New Entrants: Moderate

There is a moderate threat of new entrants into the industry as the barriers to entry
are not high enough to discourage new competitors to enter the market.

The industrys saturation is moderately high with a monopolistic competition

structure.

For new entrants, the initial investment is not significant as they can lease stores,
equipment etc. at a moderate level of investment.

At a localized level, small coffee shops can compete with the likes of Starbucks
and Dunkin Brands because there are no switching costs for the consumers. Even thought
its a competitive industry, the possibility of new entrants to be successful in the industry
is moderate.

Threat of Substitutes: High

There are many reasonable substitute beverages to coffee, which are mainly tea,
fruit juices, water, sodas, energy drinks etc. Bars and Pubs with non/alcoholic beverages
could also substitute for the social experience of Starbucks

Consumers could also make their own home produced coffee with household
premium coffee makers at a fraction of the cost for buying from premium coffee retailers
like Starbucks.

There are no switching costs for the consumers for switching to substitutes, which
makes the threat high.

But its important to note that industry leaders like Starbucks are currently trying
to counter this threat by selling coffee makers, premium coffee packs in grocery stores
but this threat still puts pressure their the margins.

Bargaining Power of Buyers: Moderate to Low Pressure

o

There are many different buyers in this industry and no single buyer can demand
price concession.

It offers vertically differentiated products with a diverse consumer base, which

make relatively low volume purchases, which erodes the buyers power.

Even though there are no switching costs with high availability of substitute
products, industry leaders like Starbucks prices its product mix in relation to rivals stores
with prevailing market price elasticity and competitive premium pricing.

Consumers have a moderate sensitivity in premium coffee retailing as they pay a

premium for higher quality products but are watchful of excessive premium in relation
product quality.

Bargaining Power of Suppliers: Low to Moderate Pressure

The main inputs into the value chain of Starbucks is coffee beans and
premium
Arabica coffee grown in select regions which are standard inputs, which makes the cost of
switching between substitute suppliers, moderately low. But this relatively easy entry into the
market is usually countered by large incumbent brands identities like Starbucks who have
achieved economies of scale by lowering cost, improved efficiency with a huge market share.
There is a moderately high barrier for the new entrants as they differentiate themselves from
Starbucks product quality, its prime real estate locations, and its store ecosystem The incumbent
firms like Starbucks have a larger scale and scope, yielding them a learning curve advantage and
favorable access to raw material with the relationship they build with their suppliers. The
expected retaliation from well-established companies for brand equity, resources, prime real
estate locations and price competition are moderately high, which creates a moderate barrier to
entry. to decrease, which will likely translate into lower market costs and higher. starbucks, with
its size and scale, has the power to take advantage of its suppliers but it maintains a Fair trade
certified coffee under its coffee and farmer equity (C.A.F.E) program, which gives its suppliers a
fair partnership status, which yields them some moderately, low The suppliers in the industry also
pose a low threat of competing against Starbucks by forward vertical integration, which lowers
their power.

Starbucks also forms a highly important part of the suppliers business, due its size and
scope, which make the power of the suppliers lower. Given these factors, suppliers pose a
moderately low bargaining power.
Intensity of Competitive Rivalry: High to Moderate

The industry has a monopolistic competition, with Starbucks having the largest
markets share and its closest competitors also having a significant market share, creating
significant pressure on Starbucks.

Consumers do have any cost of switching to other competitors, which crates high
intensity in rivalry.

But its important to note that Starbucks maintain some competitive advantage as it
differentiates its products with premium products and services, which cause a moderate
level of intensity in competition.

The industry is mature and growth rate has been moderately low which cause the
intensity of competition among the companies to be moderately high due to all of them
seeking to increase market shaper from established firms like Starbucks.

This industry does not have over capacity currently and all these factors
contribute to the intensity among rivals to be moderately high.
Looking at the Porters five forces analysis, we can get an aggregate industry analysis that
the strength of forces and the profitability in the retail coffee and snacks industry are
Moderate.

Apple Inc.

Key value drivers

Industry Demand Determinants and Profitability Drivers:

The industrys demand for premium coffee and snack products are mainly driven by a number of
factors which include disposable income, per capita coffee consumption, attitudes towards health,
world pricing of coffee and demographics. This industry is highly sensitive to the macroeconomic
factors that affect the growth in household disposable. During the recession, the decline in
household disposable income due to increased unemployment and stagnant wages, caused a
downward pressure on the revenue and profitability margins in the industry. Another crucial
factor for analyzing the demand in the industry is the per capita coffee consumption where the
increase in coffee consumption increases the revenue of coffee & snack shops. The main driver of
this consumption increase would be the increase disposable income, as the economy improves
and consumers start to relax their budgets. This driver has a positive effect on market revenue.
Per capita coffee consumption is expected to increase in 2014.

As coffee beans are the primary input in the value chain of the industry participants, the
prevailing volatile prices of coffee beans determines market costs and profitability margins. The
world price of coffee has risen sharply in recent years due to growing demand in other countries
and the resulting supply shortages. During the five years to 2018, coffee bean prices are projected
to decrease, which will likely translate into lower market costs and towards health also play an
important role in determining the demand in the industry.
There is an expected shift towards healthy eating and diet among the consumers in 2014, and this
could be a potential threat to the industry as they become more aware of issues related to weight
and obesity. There has been a proactive shift among the industry participants to tailor their menus
towards more organic and healthy products mix.

Starbucks Key Strategies:

One of the key strategy that Starbucks followed since its inception is that of product
differentiation offering differentiators such as premium product mix, locations, coffee
beverages reputation and supreme customer service that translated to building a premium
valued brand which is costly to imitate for competitors. Starbucks has also followed a
shrewd strategy of strategic alliance and making smart acquisitions. Starbucks didnt
follow franchising model and operated company oriented stores and joint ventures in
international markets. Starbucks has made some key acquisitions such as Teavana (Tea
products), Bay Breads (premium bread products), Evolution Fresh (fresh juice products)
etc. to use the product diversification strategy . Appendix 1 gives a whole list of joint
ventures, strategic alliances and acquisitions of Starbucks. Starbucks acquisition strategy,
as shown in their acquisition history in Appendix, has been horizontal, product and
market extensions acquisitions. Another crucial strategy for Starbucks growth has been
its international strategies of expanding into key developed and emerging markets to
geographically diversify, and it has been highly successful with operation spanning 60
countries. All these strategies have derive considerable competitive advantage for
Starbucks over its competitors.

Comparison
ThemajorcompetitorofStarbucksisDunkinbrands(Appendixshowsthemarketshare).Theytogether
shareapproximately60%market,butthestrategiesfolloweddiffer.


Starbuckscorporation

TheyhaveastrategyofofferingPremium
productswithhigherpricerangetotarget
theclasses.

Theydonotofferfranchisingoptionsfor
expansion.

Theydidnotbelieveinmarketingbut
startedimplementingsuchstrategieswhen
facedcompetitionfromDunkinBrands.

DunkinBrands

DunkinBrandsclaimstoofferthesimilar
premiumproductwithlowerprices.

TheyofferFranchisestoenterintonew
markets.

Theyusemarketingstrategiestoincrease
sales