1 Strategic Plan, Part 1: Environment Scan Strategic Plan, Part 1: Environment Scan The creation of Starbucks formalized in 1971 from three college friends who saw the knack for coffee in their neighborhood. Jerry Baldwin, Zev Siegl, and Gordon Bowker had an idea from Peet's Coffee and started their own business. However, it did not receive the recognition the three friends wanted to continue with the business. Ten years later, in 1981, the three friends sold their business to Howard Schulz, who gentrified the brand, assigned a new name, and constructed Starbucks (Coffee, 2016). Environmental scanning is comprised of several steps. Information gathering, research about the industry, federal, state, local and international laws, and demographics are all tools to help initiate strategic awareness of competitors, which leads to the next stepfocusing on the competition. A company needs to understand the history and business culture of its competitor, following trends and other pertinent information that directly affects the business, to remain relevant. From there, a business needs to understand its strengths and weaknesses to know how to plan its future. In this paper, the environmental scan for Starbucks is deduced from a new market and business standpoint with a newly formed executive board (James, 2016a). Environmental Scanning 2 Environmental scanning is the review process of the current and the anticipated environmental factors that can have the impact of your organization (Nonprofit Answer Guide, 2016). The environmental scanning strategy entails obtaining information on the business environments in which a company is operating or considering entering (Chuang, 2016). It is critical the Starbucks because this process helps to determine the value and sustain the competitive advantage over its competitors. There are four main reasons why environmental scanning strategy is important and valuable for the Starbucks. First, it helps to identify the Starbuck's strengths, weaknesses, opportunities, threats, (SWOT) analysis. It gives the organization the first look on what needs to be done and evaluated to be successful. Today Starbucks has surpassed 23,000 stores worldwide including in the United States and is planning to expand more. Second, the environmental scanning process benefits Starbucks to make the optimum utilization of human, natural, and capital resources. In other words, it guides the organization to run with efficiency and effectiveness (Kumar, 2016). Third, it not only advocates identifying the SWOT analysis, but it also helps Starbucks to maximize its strength, minimize its weakness, grab the opportunity, and diffuse threats (Kumar, 2016). Lastly, it assists to make a better business decision because the process of environmental scanning enables the firm to select the best option out there and will be vital for the success and the growth of the company (Kumar, 2016). Environmental Scanning Strategy Competitive Advantage The environmental scan strategy is used by Starbucks to help and make business decisions that might not be seen as being traditional but are also very effective. Environmental scanning gets information and puts it together from a company by using internal and external data. The scanning process also examines the information in which the company is running. By using the process of the environmental scanning process, it will give the company the capability to fight and attack the risks and threats due to the economy and competition. Also, Starbucks' determination to use innovation for their product lines, while maintaining a complete quality of 3 service strengthens the firm financially. Starbucks can use a SWOT analysis to help make choices that will help the organization to be and stay successful today and in the future. Starbucks advertises but only uses a small amount of money on marketing they depend highly on the word of mouth approach. Starbucks believes that making their customers feel welcomed and; then they will keep coming back for not only the coffee but also the atmosphere. While incorporating a great atmosphere and experience, Starbucks hopes to not only keep their customers returning but also tell others about their experience. Starbucks continues to be competitive by using their innovative ideas to stay on top. They offer not only a great place to hang out while using their WIFI but also a huge variety of products that are always changing. Industry Environment The industry environment is a factor that influences Starbucks, its competitive actions, and responses. The factors include new entrants into the market, suppliers, buyers, product substitutes, and intensity that lie between its rivals. Because these factors can affect Starbucks' profitability, they must keep a keen awareness of the environment. Elder, Lister, & Dauvergne (2014) discuss that in recent years big retail stores and retailers, such as Wal-mart, McDonald's, Costco, Starbucks, and Dunkin Donuts, have become a powerful force in shaping where and how coffee is produced. This \"powerful force\" drives the market to produce sustainable standards keeping them competitive (Crowell, 2016). Though being sustainable has numerous definitions, many retailers find standards are when having labels of Fairtrade, Organic, Rainforest Alliances, Utz Certified, and CAF Practices to leverage sustainable coffee initiatives and to increase profit margins (Elder, Lister, & Dauvergne, 2014). Starbucks was the leader, who started selling Fairtrade certified coffee in 2000, allowing them to compete with commercial coffee in the mainstream markets and keep consumers content with quality and demand for premium coffee (Elder, Lister, & Dauvergne, 2014). Other threats to the company are product substitutes with beverages like tea, fruit juice, water, and soda (Geereddy, 2013). Also, when looking at the market demand and profitability drivers, Starbucks looks at the attitudes of its buyers (Crowell, 2016). \"There is an expected 4 shift towards eating healthy and diet among the consumers in 2014, and this could be a potential threat to the industry as they become more aware of issued related to weight and obesity,\" (Geereddy, 2013). As a response to threats, Starbucks offers premium product mix, different locations, coffee beverage reputation, and customer service that is difficult for competitors to imitate (Bailey, 2016). Internal operating environment There are times when mastering the aspects that impact a business directly could present a bigger challenge than those created by others. In this competitive market, it is vital for Starbuck's management to be able to anticipate and recognize and deal with the forces that could impact the company's internal business environment. An essential internal business factor at Starbucks is keeping our employees satisfied (Montoya, 2016). In a survey conducted in 2015, the average employee rating at Starbucks was 3.8 stars out of 5 compared to Dunkin' Donuts 2.8 stars and Pete's Coffee at 3.2 stars (Mooney, 2015). This survey focused on the culture and values, work/life balance, senior management, compensation and benefits, and career opportunities within the company. When the employees' listed the positive aspects of their jobs, our employees were more focused on the company's vision and values rather than the more usual benefits (Mooney, 2015). The company has realized that employees who feel valued by their employers will usually take the time and effort to treat customers with the care and attention they expect. Eventually giving our customers a positive perception of the company and reduce the chances of them leaving for our competitors (Montoya, 2016). Analyses. The strengths and weaknesses of a SWOT analysis are internal factors that integrated an essential role in the success of the company. Starbucks Coffee's main strengths are (Lambardo, 2015): 5 1. Strong Brand Image 2. Extensive Global Supply Chain 3. Diversified Business Through Subsidiaries. While Starbucks Coffee's weaknesses include: 1. Higher price points 2. Generalized Standards for most products 3. Imitable Products. Conclusion The environmental scan promotes a business's profitability by synergizing management initiatives from a short-term and long-term goal perspective. Envisioning a plan that institutes credibility and examines the competitor's strengths and weaknesses allow the company to continue successful growth. Starbucks immerses itself in the environmental scanning by continually researching the competition, providing its shareholders with quarterly updates on the financial and structural profitability of the company, and developing measures to place itself strategically in the top percentage of the industry. Effectively balancing this scope of work will propel any business, including Starbucks, ahead securing their financial future. 6 References Bailey, M. (2016) CTO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Chuang, M. (2016) CEO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Coffee. (2016). The History of Starbucks. Retrieved from: http://www.coffee.org/Historyof-Starbucks Crowell, E. (2016) CMO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Elder, S. D., Lister, J., & Dauvergne, P. (2014). Big retail and sustainable coffee: A new development studies research agenda. Progress in Development Studies, 14(1), 77-90. doi:http://dx.doi.org/10.1177/1464993413504354 Geereddy, N. (2013). Strategic analysis of Starbucks Corporation. Harvard University. Retrieved from http://scholar.harvard.edu/nithingeereddy/publications/strategic-analysis-financialanalysis James, A. (2016a) CAO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. James, A. (2016b) CFO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Kumar, B. (2016). \"8 Important Needs and Importance of Environmental Scanning Business\". Retrieved from http://www.preservearticles.com/2013082933393/8-importantneeds-and-importance-of-environmental-scanning-business.html Montoya, I. (2016) COO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Nonprofit Answer Guide. (2016). What's the purpose of the environmental scan and how do we get this? Retrieved from http://nonprofitanswerguide.org/faq/strategic- 7 planning/whats-the-purpose-of-the-environmental-scan-for-your-nonprofit-organization/ Starbucks. (2016). Investor Relations. Retrieved from: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-reportsAnnual 8 Appendix A: Securities and Exchange Commission (SEC) Research In fiscal 2015, Starbucks Coffee Company once again delivered outstanding financial performance with record results and record cash returned to shareholders (James, 2016b). Full fiscal 2015, consolidated net revenues grew 17%, to a record $19.2 billion, over last fiscal year (Starbucks, 2016). -Non-Generally Accepted Accounting Principles (GAAP) operating income was up 19%, to $3.7 billion, over FY14 non-GAAP operating income (Starbucks, 2016). -Non-GAAP operating margin of 19% expanded 50 basis points compared to FY14 non-GAAP results (Starbucks, 2016). -Non-GAAP Earnings Per Share (EPS) of $1.58 was an impressive 19% increase more than the previous year's non-GAAP EPS (Starbucks, 2016). These record financial results provided the ability to reinvest in our business while returning a record $2.4 billion of cash to our shareholders through dividends and share buybacks, up more than 50% from 2014 levels (Starbucks, 2016). 9 1 Strategic Plan, Part 2: Internal and External Environmental Analysis Strategic Plan, Part 2: Internal and External Environmental Analysis Starbucks is a larger than life company that most people have tried at one time in their lives. This company has reached high goals and profits and will continue to thrive in the future. Starbuck's internal and external environment is paramount and the reason for their success. Many factors help make Starbucks a number one company above the rest of their competition. This paper will discuss their internal and external environmental analysis, the factors that help sustain it, the influence it has, and the competitive position in which it functions. Internal Environmental Factors Starbucks is a company that has been able to sustain and continue to flourish. By understanding some of these reasons, we can evaluate the company and look at what makes it such a profitable company. Starbucks has many tangible resources, for example, their stores and where they are located. Starbucks also has proprietary roasting plants (Starbucks, 2016). There are Starbucks stores in around forty countries around the world. Having so many stores throughout the country helps them to reach their mission statement to bring a great experience to their consumers with one cup of coffee at a time. They also own many other companies, such as Seattle's Best and Teavana's Tea (Starbucks, 2016). Owning a variety of companies helps 2 Starbucks to reach a vast market and increase profits. With their vast variety of companies, Starbucks' proprietary roasting facilities in different areas have been purposely placed around the world (Research Methodology, 2016). Starbucks provides many different benefit packages to their employees. These benefits packages help to create a positive environment and incentivize their employees (Bailey, 2016). Their intangible resources are items such as logo, training programs, and proprietary coffee beans. An example of their employee process is internal promotion that increases employee productivity and satisfaction. Strengths, Weaknesses, Opportunities, Threats Starbucks has an extensive product line, various locations, and a solid reputation that actuate its marketing plan. They are well known for their high-quality coffee ingredients and their variety of food and beverages. Starbucks can choose the location of their stores, which financially benefits the company (Bailey, 2016). These areas are set in the heart of bustling cities where revenue is at its peak. Starbucks has some weaknesses such as high operating costs, expanding their stores and their product lines, and increasing their pricing higher than their competition. Due to overextending themselves financially, Starbucks had to close some of its stores. The threats plaguing Starbucks include other direct open sale businesses such as ChickFil-A and McDonalds (Starbucks, 2016). These competitors sell different items on the menu but are considered the same type of industry. Chick-Fil-A is the number one retail direct open sale business and is a direct competitor to Starbucks (Starbucks, 2016). The differences, besides menu, are the hours and the \"foot traffic.\" There are many opportunities for Starbucks. Some of these opportunities include expansion into different markets and promoting a more health conscious product for the customers (Forbes, 2014). External Environmental Factors Competitive Benchmarking Competitor benchmarking is a process of comparing a firm's practice and performance compared with its most successful competitors. Its primary objective is to analyze how other organizations achieve higher performance level and to use this information to improve your performance. The benchmarking can keep your business stay active by generating efficiency and improving operation, but it will not help you win the game. There is one significant edge of benchmarking, and that is to give you the competitive advantage over rest of your competition (Seitchik, n.d.). It will put you ahead, but it will not make you the leader of the industry. The major issue with benchmarking is that your new direction and the copy might only give you part of the success but not all (Seitchik, n.d.). For example, the reasons why the Starbucks is so successful are not just because of its coffee quality, but also from the collaboration and the friendliness of its employees, its well-adapted culture, and its emotional connection with every single customer. The Starbucks is one of the most popular and the strongest brand in the coffee industry, and our goal is not to benchmark our competitors but to be benchmarked by them. The 3 Starbucks would like to be the innovators of this coffee industry because we invent a new way for people to enjoy coffee. Organizational Structure Performance Starbucks Coffee began 30 years ago with a single store and has grown to become the largest coffeehouse chain in the world yielding revenue of nearly $18.5 billion dollars in 2015 (Hawley, 2013). The organization's Chief Operating Officer's emphasis is to develop and create a place where our customers can experience a great cup of coffee within a relaxed atmosphere (Montoya, 2016). To ensure customers experience a great atmosphere, the day-to-day operations at Starbucks are managed, and there are strategies executed that are developed by the company's top management team. By taking care of these tasks, it enables the company's CEO to focus strictly on the strategic, longer-term challenges within the enterprise. Organization structures play a vital role in a company's performance. Without defined policies or procedures in place, the company could potentially lack the performance upper management desires for the organization. Starbuck's organizational structure has been designed to grow with our business and is a hybrid mixture of different types of organizational structures (Meyer, 2015). The company's primary organizational structures include the following tactics: 1. Functional Structure 2. Geographic Divisions 3. Product-based Divisions 4. Teams These strategic tactics have great success, allow the enhancement of our processes, and continue production of the quality of our goods and services (Meyer, 2015) Competitive Position Possibilities Determination. 4 As a global company, Starbucks is not compared to local coffee shops due to its mass customization and mass-produced goods. Because of the rapid increase of chains stores opening in early 2000's, Starbucks was put into a competitive position where a need to revitalize their brand was necessary (Aiello & Dickinson, 2014). The possibilities this provides for the company is a \"new global store design strategy, aimed at setting the stage for a reinvigorated customer experience,\" (Aiello & Dickinson, 2014). With visually pleasing aesthetics, local stores reimaged themselves for a more artisan and neighborhood feel. The Chief Marketing Officer incorporates marketing strategies to cater to the customer's emotions when entering a store (Crowell, 2016). This marketing plan consists of serving high-end brands in a \"relaxing, appealing atmosphere that invited the consumer to unwind while enjoying fine coffee experience,\" (Seaford, Culp, & Brooks, 2012). Alongside the experience Starbucks wished to create, Starbucks faces competition to serve premium coffee beans from the world's largest coffee supplier, Arabica. Due to a prolonged drought that Brazil experienced, the price per cup of coffee increased. However, according to Chuang (2016), despite the 74% of retail sales from its beverages, the coffee accounts for less than 20% of the cost of goods. Starbucks can enter new markets with its products, food selection. Starbucks targets the loyal customers through brand loyalty, customer experience and satisfactions, and quality control for example through Wi-fi in stores (Coffee, 2016). Conclusion The internal and external environment analysis carries the collaborative efforts of each business department, and how they blend the firm's vision to include ethics and morals for profitability. Starbucks has closely cemented their growth in the industry by exacting civility 5 within their business (James, 2016a). The analysis assists with creating a granular scope of focus for trends scrutinizing competitors and levying the successful purview of other industries. Maintaining a credulous financial portfolio and analyzing the business environment to make effective changes if necessary, allows the firm to stay relevant. The analyses supplement the business and truncate losses it may receive over time. Balancing these supplemental items accedes to an improved company infrastructure. 6 References Bailey, M. (2016) CTO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Chuang, M. (2016) CEO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Coffee. (2016). The History of Starbucks. Retrieved from: http://www.coffee.org/Historyof-Starbucks Crowell, E. (2016) CMO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Forbes. (2014). Retrieved from: http://www.forbes.com/sites/micahsolomon/2014/11/01/speedup-your-customer-service-like-starbucks-and-apple-but-never-ever-rush-it/ Hawley, J. (2013, October 13). Who Are Starbucks' Main Competitors? Retrieved May 26, 2016, from Investopedia: http://www.investopedia.com James, A. (2016a) CAO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. James, A. (2016b) CFO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Meyer, P. (2015, September 13). Starbucks Coffee Company's Organizational Structure. Retrieved May 26, 2016, from Panmore Institute: http://www.panmore.com/starbuckscoffee-company-organizational-structure Montoya, I. (2016) COO Information. Paper presented to University of Phoenix on Strategic Plan, Part 1, Phoenix, AZ. Research Methodology. (2016). Retrieved from http://research-methodology.net/starbucks-valuechain-analysis Seitchik, M. (n.d.). Benchmarking: The Antidote to Innovation and Competitive Advantage. Retrieved from https://mrtashfeen.wikispaces.com/file/view/Benchmarking- 7 Final.pdf Starbucks. (2016). Investor Relations. Retrieved from: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-reportsAnnual 8 Appendix A: Executive Board Members Ms. Mary Bailey, Chief Technology Officer Mr. Mike Chuang, Chief Executive Officer Ms. Emily Crowell, Chief Marketing Officer Ms. Angela James, Chief Administrative Officer, Chief Financial Officer Mr. Israel Montoya, Chief Operating Officer 9 Appendix B: Quarter 1, 2016 Highlights Global comparable store sales increased 8%, including a 4% increase in traffic (Starbucks, 2016) Americas comp store sales increased 9%, including a 4% increase in traffic China/Asia Pacific comp store sales increased 5%, driven by a 4% increase in traffic EMEA comp store sales increased 1%, driven by a 1% increase in traffic Consolidated net revenues grew 12% over Q1 FY15, to a record $5.4 billion Consolidated GAAP operating income increased 16% over Q1 FY15, to a record $1.1 billion Non-GAAP operating income increased 15% over Q1 FY15 non-GAAP, to a record $1.1 billion Consolidated GAAP operating margin increased 60 basis points over Q1 FY15, to a Q1 record 19.7% Non-GAAP operating margin expanded 40 basis points over Q1 FY15 non-GAAP, to a Q1 record 19.9% GAAP EPS of $0.46 versus Q1 FY15 GAAP EPS of $0.65 Non-GAAP EPS increased 15% over Q1 FY15 non-GAAP, to a record $0.46 Opened 528 net new stores in the quarter globally, including a record 281 stores in China/Asia Pacific and a record 79 stores in EMEA Channel Development revenues increased 16%; operating margin expanded 210 basis points and operating income increased 23% over Q1 FY15 Company served over 23 million more customer occasions from its global comp store base - 18 million in the U.S. - in Q1 over the prior year Record $1.9 billion loaded on Starbucks Cards in the U.S. and Canada; 1 in 6 American adults received a Starbucks Card over Holiday, up from 1 in 7 in Q1 FY15 Membership in the company's My Starbucks Rewards loyalty program increased 23%; the company now has more than 11 million active members in the U.S. (James, 2016b) Economic Analysis 1 Economic Analysis Rae Grimm Economics - ECO531 June 22, 2015 Kate Stowe 1 Economic Analysis 2 Economic Analysis Graham's Financial Services is a new small business located in St. Mary Parish of Louisiana ran by sole owner Rae Grimm. Its services include accounting, payroll, advisory and tax preparations for those individuals or businesses that are in need of financial assistance. Although it is a fairly new organization, Graham's is prepared to compete in the current market of other businesses that are similar in structure. Market Structure Within this market structure of the financial service industry, sellers have control over the pricing. Because of the lack of competition within the St. Mary Parish area, the price of the services can be up to the owner, Rae Grimm. To keep a successful company for many years, it is best to research specific services with other reputable businesses and determined a price that can be accepted by consumers and profitable to the company. Whereas a finance service business may charge a flat rate of $150 for all tax preparations and $300 a month for payroll services, for example. Owner Rae Grimm can decide to charge a fixed rate of $100 for a tax preparation and an additional variable rate for labor. The same goes for payroll services for example; a fixed monthly rate can be $200 with variable rating dependent on labor and delivery costs. Labor includes the length of time for the various preparations, delivery costs, printing checks if necessary and traveling costs to and from sites. Below is an example of pricing differences between average companies and Graham's Financial Services for payroll services. 2 Economic Analysis 3 Payroll Services (monthly rates) Company A Graham's Financial Services Flat Fee Labor Costs Delivery Costs Additional Fees $300 $200 $2/check $25-40 varies varies Numbers are based average payroll services, online and physical locations http://smallbusiness.costhelper.com/payroll-serivce.html Demand of Elasticity Locally, there not many competing businesses of the same services. There are only a few known franchises available, so it gives Graham's the motivation to be able to have a successful business amongst its top sellers of the financial services industry. As demand continues to increase for these services, employment will begin to merge as well. According to the Bureau of Statistics, \"Employment of bookkeeping, accounting, and auditing clerks is projected to grow 11 percent from 2012 to 2022, about as fast as the average for all occupations. As the number of organizations increases and financial regulations becomes stricter, there will be greater demand for these workers to maintain books and provide accounting services.\" Advertising Graham's Financial Services on the radio, social media, and newspapers would be the best option for those businesses or individuals that are in need of financial assistance. Once the quality work is completed, Graham's can rely on client reviews and verbal advertisement to increase its exposure throughout the community. The figure below displays the employment rate changes in a nearby city, Lafayette, Louisiana. From April 2014 to 2015, there was an increase of employment of the financial activities portion. If the demand continues for these financial positions, we can assume that the pricing will not affect many businesses decisions to hire Graham's if it is necessary. 3 Economic Analysis 4 There would be a slight difference between the demands for these financial services for individuals though. Even though services are offered for personal finance matters, the demand can vary. Most individuals would not even need payroll or accounting services, but tax preparations and advisory would be an interest in them. For that matter, most of advertising for those services will be targeted for personal uses. In this particular geographic location, there are not many people that would possibly want the services because of unemployment, lack of financial literacy or pricing. In any way, Graham's Financial Services will assist to help everyone that would like the offered services regardless of their financial situations. Client Economic Hardships Graham's Financial Services is a business based on financial assistance so that negotiations will be available for an accepted contract between both parties. Though, the fixed 4 Economic Analysis 5 price will have to stay in place due to profit levels of maintaining the business. As previously stated, there may be individuals that cannot afford the standard rates of Graham's Financial Services. In understanding the current economic state in this particular area, the variable prices could then be altered. The same offer would be for business clients that have been affected by an economic event. This action would assure the public that Graham's Financial Services is willing to assist community regardless of their financial situation. Improvements In such case that a service sector or all of the business is on the verge of failing, what is planned to occur? Graham's Financial Services will, on a quarterly basis, analyze all profit margins in every service offered. In an event that something does go wrong, it will be reported early for actions to begin. Each service will break down as far as the various costs, clientele numbers and reviews, advertisement, etc. to make the necessary changes if necessary. After all possible options are completed, if a service has to be cancelled then the decision will be made and announced to clients if any. If the demand for a service steadily increases, more qualified staff will be hired. These situations may affect the service cost also, but Rae Grimm will make sure that everyone will continue to remain in a healthy and confident contract accordingly. 5 Economic Analysis 6 References Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 201415 Edition, Bookkeeping, Accounting, and Auditing Clerks. Retrieved from http://www.bls.gov/ooh/office-and-administrative-support/bookkeeping-accounting-andauditing-clerks.htm. Payroll Service Cost. (2015). Cost Helper Small Business. Retrieved from http://smallbusiness.costhelper.com/payroll-service.html 6