External analysis soffee culture Essay

1.0 initiation For an goerning body to survive and grow, they must give way beardown(prenominal) build outline. scheme is get goingicularized as a tool to assist validations to achieve its long-term goals Hubbard, Rice & smiling(prenominal) (2010). These goals be the prime reason for an governing body to hold up and strategies atomic number 18 developed to achieve these goals.Fig. 1.1- ESC model for strategy developmentHubbard, Pocknee and Taylors (1996), explains the strategy making process via ESC model. Fig 1.1 shows the ESC ( milieu, dodge & Capabilities) model to tell the strategy making process for an cheek. Strategies are made feteing a number of factors in consideration. Environment stalemates for big and industry based milieu and factors that effect the operation of an organization. Environment is discussed more than in detail in later part of this report. Business strategies are made considering the concern of stakeholders, associations mission and treasure statement and checker of the organizations. Capabilities for an organization are their resources, staff, economy of wrenching and systems gettable for an organization to domesticate in.This section is also discussed in details in this report. Also, to make effective strategies companies need to generate and gain ground information, analyze that information, process and implement those chosen strategies. Hubbard, Rice & Beamish (2010) explains that final part of strategy implementation is to refresh and monitor the strategies to adjust the gaps in results and fill those gaps accordingly to improve confederation performance. 2.0. Macro Environment depth psychologyHubbard, Rice, Beamish (2010), explains that all the factors outside the organization that effect the dividing line are studied under external environment compend. These factors effect the strategy formulations, vision and mission planning and future organizational handicraft. Environment depth psycho logy comprisesof two major elements i.e. Macro environment analysis and Industry environment. Macro environment includes all the broad forces that surround and effect the organization and are as follows-2.1 frugal Dimension- Economic dimension of an organization is the boilersuit financial condition of the economy where organization is operating. Most important frugal factors for an organization is GDP, inflation rates, ex vary rates, taxation rates and wages rates. These factors define the economic dimension of an organization.Example Starbucks business in US during globose Financial CrisisDuring GFC, Starbucks was forced to pay more for its resources and to cover these additional expenses company was forced to make up its product prices. But with the rise in interest rates and less(prenominal) borrowing/spending power of customers in the market, Starbucks had no option other(a) than bearing the costs itself without increasing the prices. This additional heart and soul force d Starbucks to close 600 stores in July 2008 (page 151, Howard Schultz, 2011). This example clearly explains the effect of Economic conditions on an organization when low purchasing power of customers lead to less demand and its effect on an organization.2.2 Political/Legal Dimension This refers to the regime regulations of business and its general effect, relationship with it. Its important for an organization as it defines what the organization muckle do and what they cannot. Customs, policies, regulations of a point country considers the business of a international organization.2.3 Technological Dimension This factor defines the resources available to operate its business in a country. It defined how an organization can convert its resources into products and services. engine room is applied with the discretion of the organization further its availability and form depends on the general environment.2.4 Socio cultural Socio cultural dimensions include the culture, sociale ffect and trends, customs, fosters and demographic patterns and trends in a particular demographic area. This includes the patterns people are apply to and defined the future for the company with respect to its products.Example Starbucks in planning to expand its business in Asian countries and is planning to change 5000 year old tea-boozing culture into coffee culture (Ed Liston, 2011). Asian countries see a strong culture of consuming tea and brook square medicinal beliefs as well. Starbucks is planning to expand its business in these countries flat challenging the socio cultural dimension (page 296-305, Howard Schultz, 2011). This strategy can have entangled effects on the business. Its a direct competition amidst old traditional beliefs and habits v/s young coffee drinking generation. There are no significant results available on the topic, but will be an interesting topic to work. This strategy can affect Starbucks business dramatically.2.5 Sustainability Its a parv enu trend mostly palpable in developed countries to develop sustainable business practices to address environmental issues. Companies are expected to follow guidelines, to develop their sustainable image. This includes fair work practices, focus towards general environmental damages, deforestation, ecological concerns etc.Example Starbucks education SustainabilityStarbucks tag their stores as green and try to design the stores with recyclable products, reused cabinets, inseparable colors, and efficient lights.Companys agricultural methods are organic, using no petrochemical based fertilizers and insecticides, and they are beneficial to the environment and water (page 317-321, Howard Schultz, 2011). Starbucks also scissures 10% discount if customers bring their own coffee mugs (page 161-165, Howard Schultz, 2011). Starbucks has been busy promoting their environment pursuit by developing new environmental strategies and by minimizing their carbon step (Starbucks Website).3.0 In dustry Analysis/ porters five forces Analysis Fig. 1.3 Porters Five Forces ModelIndustry analysis is used to determine the factors that influence the profitability of an organization. As shown in fig 1.3, industry analysis consists of five principal(prenominal) forces. Porter (2008) describes these forces as the main drivers of profitability for an organization Fig 1.3.3.1 Competitors/ Threat of new entrants For an organization, competitors are those individuals or groups that can castrate the taxation or can share the revenue. New or live organizations that compete for their business, survival and growth are termed as competitors. It can be from existing market players or new entrants to the market. Mostly organizations compete for customers, revenue but competition can also be for the resources as crowd/staff, new engineering science or patents to ensure future revenue growth.3.2 Suppliers In a producing industry, suppliers play an important role by providing resources t o an industry to offer services/products to the customers. This depends on the industry-supplier relationship. If suppliers are strong, they can offer resources at a higher price to get the profit share in the organization and vice versa. Thus, in a industry its very important to have consistent and reliable suppliers.Example Starbucks coffee bean suppliersStarbuck buys its coffee from atomic number 99 Africa, Arabian Peninsula, Southeast Asia and Latin America. Starbucks has its approved suppliers list and to be part of that list, suppliers have to undergo a series of tests and pass some checklists. one time Starbucks approves their supplier, the company helps the suppliers to grow coffee sustainably (page 317-318, Howard Schultz, 2011). Starbucks helps their suppliers by providing knowledge, help, funds and trainings. This helps to develop the strong relationship with the suppliers and also ensures the quality of the harvest. Thus in this case two suppliers and the industry ar e in win-win situation.3.3 Bargaining power of buyers Porter (2008) explains that if the buy power of buyer is strong, that implies that the buyer has more options to choose from and the industry has more competition.3.4 Substitutes Porter (2008) explains that if the products/services of distinguishable business or company can satisfy the needs of the customers,depicts that there is a substitute available to the customers. It leads to the competition in terms of price, quality and added values to the products.3.5 Industry Rivalry In a traditional economic model, if there is rivalry among the organizations in the industry, thusly it drives profits to zero. But there is not perfect competition and in this case companies thrive to take combative edge over other companies. A firm can switch costs, reduce product cost, increase add on values, offer better customers service to gain the warlike edge.Example Starbucks competitive edgeStarbucks markets their sustainable and green ap proach towards environment (page 147-148 & 317-318, Howard Schultz, 2011). In this modern era, with more educated groups emerging, Starbucks is attracting more educated customers. With its enterprisingness towards green earth and working for environmental issues, customers are supporting the blur and thus Starbucks is earning reputation and revenues. The above-mentioned example is in relation with Philip Kotlers (2001), strategy of selling and is proving worth full for Starbucks.4.0 Resources, Capabilities and reality Of ValuesFig. 1.4- Resource, Capabilities and Creation of ValueAccording to resource-based view to develop the competitive advantage over other companies, organization must have resources and capabilities that arethe best in the market. In fig. 1.4, Hubbard, Rice & Beamish (2010), explains that foran organizations there are four undeniable conditions to pioneer the market. These conditions are outlined as below 4.1 Resources Resources are the main factor that dec ides the organizations future. Hubbard, Rice & Beamish (2010), have used VRIO/VRINE model to describe these resources better and resources must be Valuable nerve should monitor the market and its customers carefully and must have the resources to hold open the value to the customer. Customer needs are volatile in nature and keep changing, thus organizations must enhance and upgrade their resources according to the demand.Rare Resources of an organization should be rare and hard to imitate by the competitors. These rare resources volunteer a competitive edge to the organization and must be tight to some degree of demand in the market.Inimitable Resources should not be easily inimitable, and should be sophisticated to imitate. Its hard to keep inimitable resources in technological sector as long as the technology is a patent.Non-Substitutable Resources should be non substitutable, i.e. there cannot be any substitute to the particular resource.Organized Resources of an organiz ation should be arranged and organized according to their extremity. They should be readily available when and where required and should be properly deployed as per requirement to deliver the best quality to the customers.Exploitable Resources should be readily accessible and available to different sectors across the organization to transform them to add value to the customers.Capabilities Capabilities stand for the organizations ability to convert the available resources to customer value. Its the ability of an organization to utilize its resources in an efficient manner. Organizations should have propelling capabilities so that they can manage their knowledge, learn from them and also brings out new innovations as per requirement.Example Starbucks Logistics Chain As mentioned above Starbucks gets its coffee beans from eastern hemisphere Africa, Arabian Peninsula, Southeast Asia and Latin America. Different regions specialize in different blend of coffee. A perfect coffee i s not just a single origin, but is a mix of different beans. Starbucks has the capability to gather beans from different regions and make a perfect blend to deliver across all its stores worldwide. Its not easy to document this capability and thus not easily imitable. This is a competitive edge that Starbuck has over its competitors to pick, mix and deliver the beans faster than any other competitor in the market.Organizations should monitor and review their operations to check the purpose of the operation. Capabilities should be valuable to the customers, they should be rare, and tall(prenominal) to imitate by competitors, specific to the organization and should be better than the competitors in the market. In order to manage the capabilities organizations should exercise their capabilities across their business.These above discussed conditions should work in closely coordinated manner to develop a competitive edge over its customers and should bring better value for the customers . For example Starbucks have strong inbound logistics that in relation to Porters value creating activity is a competitive edge to create customer value.5.0 Bibliography Hubbard, Pocknee and Taylors (1996), Practical Australian Strategy, Ch. 5, Prentice Hall Australia, Sydney.Hubbard, G. & Beamish, P. (2011). Strategic centering Thinking, analysisand action, 4th ed., Pearson Education Australia.Hubbard, Rice, & Beamish, (2011), Strategic Management Thinking, Analysis and Action, 4th ed., Pearson Education, Australia.Michael E. Porter (2008), The Five Competitive Forces that Shape Strategy, Harvard Business Review, p.86-104, Harvard Business Publication, Boston, USA.Ed Liston (2011), What is more popular Coffee or Tea, Blog on www. Stockriters. Com, Viewed on 05th Jan12.Kotler Philip (2001), A Framework for Marketing Management, Prentice-Hall, Inc. 1997, Pearson Education Company, New Jersey, USA.Starbucks website viewed on 4th Jan12, http//www.environmentalgraffiti.com/business/n ews-starbucks-contribution-sustainability.Howard Schultz & Joanne Gordon (2011), in the lead How Starbucks Fought for its life without losing its soul, John Willey & Sons, United Kingdom.