External analysis soffee culture Essay

1.0 Introduction For an organization to survive and grow, they moldiness nonplus well-knit build strategy. schema is defined as a tool to assist organizations to make its persistent-term goals Hubbard, sift & Beamish (2010). These goals ar the prime reason for an organization to exist and strategies are real to achieve these goals.Fig. 1.1- ESC bewilder for strategy partmentHubbard, Pocknee and Taylors (1996), explains the strategy making process via ESC model. Fig 1.1 shows the ESC (Environment, Strategy & Capabilities) model to describe the strategy making process for an organization. Strategies are made elapseing a spot of factors in consideration. Environment stands for big and industry based environment and factors that effect the operation of an organization. Environment is discussed much in detail in later ruin of this report. Business strategies are made considering the interest of stakeholders, social clubs mission and value statement and values of the organ izations. Capabilities for an organization are their resources, staff, economy of working and systems ready(prenominal) for an organization to work in.This section is also discussed in details in this report. Also, to make effective strategies companies submit to generate and gather information, analyze that information, process and implement those chosen strategies. Hubbard, Rice & Beamish (2010) explains that final part of strategy implementation is to review and monitor the strategies to find the gaps in results and fill those gaps accordingly to improve partnership performance. 2.0. Macro Environment AnalysisHubbard, Rice, Beamish (2010), explains that all the factors outside the organization that effect the business are studied under external environment analysis. These factors effect the strategy formulations, vision and mission planning and approaching organizational business. Environment analysis 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 delineates-2.1 frugal holding- Economic symmetry of an organization is the overall financial condition of the economy where organization is operating. Most distinguished economic factors for an organization is GDP, inflation evidence, exchange rates, taxation rates and wages rates. These factors define the economic dimension of an organization. cause Starbucks business in US during Global Financial CrisisDuring GFC, Starbucks was forced to pay more for its resources and to round top these additional expenses company was forced to increase its product prices. But with the rise in interest rates and less borrowing/spending power of customers in the market, Starbucks had no option other(a) than bearing the be itself without increasing the prices. This additional burden forced Starbucks to close 600 stores in July 2008 (page 151, Howard Schultz, 2011). This exam ple 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 government regulations of business and its ecumenical effect, relationship with it. Its important for an organization as it defines what the organization give the gate do and what they washstandnot. Customs, policies, regulations of a fussy country affects the business of a international organization.2.3 proficient Dimension This factor defines the resources useable to operate its business in a country. It defined how an organization faeces convert its resources into products and services. Technology is applied with the discretion of the organization but its avail readiness and form depends on the general environment.2.4 Socio cultural Socio cultural dimensions include the nicety, socialeffect and trends, customs, values and demographic patterns and trends in a particular demographic area. This includes the patterns people are used to and defined the future for the company with respect to its products. instance Starbucks in planning to expand its business in Asian countries and is planning to change 5000 year old tea-drinking culture into cocoa culture (Ed Liston, 2011). Asian countries corroborate a strong culture of consuming tea and have significant medicinal beliefs as well. Starbucks is planning to expand its business in these countries broadcastly challenging the socio cultural dimension (page 296-305, Howard Schultz, 2011). This strategy can have mixed effects on the business. Its a direct competition between old traditional beliefs and habits v/s young coffee drinking generation. there are no significant results available on the military issue, but will be an interesting topic to work. This strategy can affect Starbucks business dramatically.2.5 Sustainability Its a bare-ass trend mostly glaring 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. framework Starbucks fostering SustainabilityStarbucks tag their stores as green and try to design the stores with recyclable products, reused cabinets, natural colors, and efficient lights. telephoners agricultural methods are organic, using no petrochemical based fertilizers and insecticides, and they are beneficial to the environment and weewee (page 317-321, Howard Schultz, 2011). Starbucks also offers 10% discount if customers bring their own coffee mugs (page 161-165, Howard Schultz, 2011). Starbucks has been busy promoting their environment involvement by developing new environmental strategies and by minimizing their carbon footprint (Starbucks Website).3.0 Industry Analysis/ door guards five forces Analy sis Fig. 1.3 doormans Five Forces ModelIndustry analysis is used to curb the factors that influence the profitability of an organization. As shown in fig 1.3, industry analysis consists of five main 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 disgrace the revenue or can share the revenue. New or existing organizations that compete for their business, endurance and growth are termed as competitors. It can be from existing market players or new entrants to the market. broadly organizations compete for customers, revenue but competition can also be for the resources as labor/staff, new technology or patents to ensure future revenue growth.3.2 Suppliers In a producing industry, suppliers play an important intention by providing resources to 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 East Africa, Arabian Peninsula, Southeast Asia and Latin America. Starbucks has its approved suppliers list and to be part of that list, suppliers have to support a series of tests and pass some checklists. Once 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 knowl progress, help, cash and trainings. This helps to develop the strong relationship with the suppliers and also ensures the fiber of the harvest. Thus in this case both suppliers and the industry are in win-win situation.3.3 Bargaining power of buyers Porter (2008) explain s that if the buying 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 different 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, then it drives profits to zero. But there is not holy competition and in this case companies lucubrate to take competitive edge over other companies. A firm can switch costs, reduce product cost, increase add on values, offer better customers service to gain the competitive edge.Example Starbucks competitive edgeStarbucks markets their sustainable and green approach towards environment (page 147-148 & 317-318, Howard Schultz, 2011). In this modern era, with more amend groups emerging, Starbucks is attracting more educated customers. With its initiative towards green earth and working for environmental issues, customers are supporting the fault and thus Starbucks is earning reputation and revenues. The above-mentioned example is in relation with Philip Kotlers (2001), strategy of Marketing and is proving worth full for Starbucks.4.0 Resources, Capabilities and Creation Of ValuesFig. 1.4- Resource, Capabilities and Creation of ValueAccording to resource-based view to develop the competitive gain over other companies, organization moldiness 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 necessary conditions to pioneer the market. These conditions are outlined as below 4.1 Resources Resources are the main factor that decides the organizations future. Hubbard, Rice & Beamish (2010), have used VRIO/VRINE model to describe these resources better and resources must be Valuable Organization should monitor the market and its customers carefully and must have the resources to deliver 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 secure to imitate by the competitors. These rare resources provide a competitive edge to the organization and must be scarce 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. organize Resources of an organization should be arranged and organized according to their requirement. They shoul d 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 dynamic 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 East Africa, Arabian Peninsula, Southeast Asia and Latin America. Different regions constringe in different blend of coffee. A perfect coffee is not just a hit origin, but is a mix of different beans. Starbucks has the capability to gather b eans 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 difficult 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 circumspection Thinking, analysisand action, 4th ed., Pearson teaching method 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 bean 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/news-starbucks-contribution-sustainability.Howard Schultz & Joanne Gordon (2011), Onwards Ho w Starbucks Fought for its life without losing its soul, John Willey & Sons, United Kingdom.