Both internal and external forces impact a corporation’s strategy, implementation, and the potential success of the company in meeting its objectives. It is no different for Starbucks, the largest coffee chain in the world (IBISWorld, 2016).
General forces in the societal environment
Every company must deal with external sociocultural, technological, economic, environmental, and political-legal forces in the societal environment. Sociocultural factors are dealt with by having a strong internal culture, which overrides local cultural expectations, although it might provide some parameters with regard to the experience. For Starbucks this has been dealt with by ensuring a common understanding of the Starbucks message, including many product placements in movies and media (Zhang, 2013). Technological factors include the use of information age media in marketing, which Starbucks has tied to sociocultural realities through co-creation strategies with customers (Sindhwani & Ahuja, 2014). External economic factors include the regional economy of the location, as well as details such as the cost of parking, both of which can hurt retail sales (Hymel, 2014). Environmental factors for Starbucks include local ambiance, and Starbucks is typically located in busy intersections. Political-legal factors can be an impediment to business if there is local, regional or national strife.
Fragmented versus consolidated industries
Coffee chains represent a consolidated industry with some fragmented elements, and Starbucks is a representative of a consolidated company which ensures a fairly standard expectation of what Starbucks has to offer at any of its locations across the globe. In a consolidated industry there are clear market leaders which the industry plays close attention to, particularly with regard to their business model and implementation. A fragmented industry, on the other hand, has little standardization, few market entry barriers and an eclectic mix of choices without market leaders. It is true that there continue to be small coffee shops, particularly given the low barriers to market entry (IBISWorld, 2016). Still, Starbucks is the industry leader which has largely set the example to be followed. Despite this, small eclectic coffee shops can take advantage of their difference from Starbucks as well, as they have more flexibility in ensuring that local tastes are reflected and catered to in contrast to the coffee retail giant.
Structure and culture as internal strengths and weaknesses
A corporation’s structure and culture can be internal strengths or weaknesses depending on whether they limit or enable the capacity to meet organizational goals. Starbucks has a top down functional structure which helps to facilitate standardization, despite a vast number of locations across the world. It could be said that in the case of Starbucks the company culture is stronger than local culture. One of the weaknesses stems from its strength, its standardization. It is therefore easy for competitors, even small fragmented coffee shops or chains, to create a copy of the Starbucks experience. An internal factor analysis summary table might help in that regard by identifying strengths that can be built with as well as weaknesses to be changed or managed.
Starbucks strength is its easily recognizable style and business model. With regard to the ability to copy to the Starbucks model, this might include using proprietary methods that are difficult or expensive for other companies to emulate. Another strategy is a strong legal team that copyrights or patents the Starbucks methods to create its consolidated culture, and then tracks down and threatens action where the Starbucks methods are being infringed. Areas which could be strengthened might include price structure, and this might involve introducing new efficiencies into the supply chain or even purchasing parking spaces near its locations for use by customers in order to increase traffic.
- Hymel, K. (2014). Do parking fees affect retail sales? Evidence from Starbucks. Economics of Transportation, 3(3), 221-233.
- IBISWorld. (2016). Coffee & Snack Shops in the US : Market Research Report. CSU Online Library.
- Sindhwani, P., & Ahuja, V. (2014). A study of online co-creation strategies of Starbucks using netnography. International Journal of Online Marketing (IJOM), 4(1), 39-51.
- Zhang, X. (2013). Communicating Coffee Culture through the Big Screen: Starbucks in American Movies. Comparative American Studies.
