IntroductionStarbucks which started their business in 1971 has grown and with continuous innovation and changes has developed the coffee industry. This has provided an opportunity for other provides to look into and has increased the opportunities of higher profits. The increasing demand for coffee and the change in the attitude of customers towards this provides an opportunity for the different players to market their services (Starbucks, 2012). Starbucks has thereby ensured that they are able to target a large audience and ensure better opportunity. Purpose of ReportThe purpose of this report is to conduct an external analysis of the coffee industry so that its effect of Starbucks coffee can be identified.
This will help to work forward on the internal analysis as external factors will help to understand its impact on business and will thereby help to understand the competition level, target customers and identify the strengths and weakness of the organization thereby presenting the future opportunities. Nature of ServiceStarbucks which performs in the coffee industry works in the service sector. The company on this aspect has looked towards providing coffee through its outlets and looks towards customer satisfaction.
This strategy is based on the fact that the company has looked towards developing a niche market and has thereby focused their attention towards providing something extra other than coffee so that customers remain loyal as there is little differentiation in the nature of business of Starbucks & other competitors (Thompson & Strickland, 1999). Macro Environmental AnalysisThe macro environmental analysis which deals with the external factors will help to understand the manner Starbucks needs to deal with it so as to ensure profits.
The industry analysis will thereby focus on the industry instead of a single player like Starbucks. This is depicted in the chart belowThe above graph shows that macro environmental factors have an effect on the working of companies which is thereby explained through the PESTEL analysis (Oxford University Press, 2007)PoliticalCoffee industry has to undergo tremendous political pressure as coffee importers have to ensure proper custom and tariff rules on the imported cocoa beans. This makes it important that the different importers need to understand the manner in which changes in the political front and political policies are dealt with.
Economic FactorsThe recent economic crisis has affected the business as rising operational cost with decreasing profit margins has reduce the real wages in the hands of consumers which has affected the consumption pattern and has resulted in increased inflation and unemployment (Bureau of Labour Statistics, 2011). The market is slowly improving and will thereby present a better outlook in the future (World Bank, 2010). The coffee industry on this regards competes on two front firstly is the undifferentiated traditional coffee and secondly is the Italian style coffee beverages.
The coffee industry to continue with its operations will look towards low cost coffee for the fringe customers and higher cost coffees for the affluent consumers (Moreno, 2008). This will help the coffee industry to deal with the present economic scenario and ensure increase consumption of coffee.