Strategy formulation of Starbucks

Topics: Starbucks, Coffee, Porter five forces analysis Pages: 13 (2671 words) Published: September 17, 2014
1.0 INTRODUCTION

The purpose of this essay is to prepare a strategy formulation analysis required by the company. The company selected is Starbucks Corporation, commonly known as Starbucks, when they first started in Seattle, Washington in 1971, founded by Jerry Baldwin, Zev Siegl, and Gordon Bowker; and became an American multinational company which started from scratch (Garza, n.d.). It was then incorporated on November 4, 1985, and is a roaster, marketer, and retailer of coffee. Starbucks offers a range of exceptional products include coffee, handcrafted beverages, merchandise, and fresh food. The company's mission is "to inspire and nurture the human spirit - one person, one cup, and one neighborhood at a time" (Starbucks, 2012).

Today, Starbucks is known as the largest coffeehouse company in the world, connecting with millions of customers every day with exceptional products and nearly 18,000 retail stores in 60 countries and is ranked 208 amongst the Fortune 500 companies (Starbucks, 2012).

The subsequent part of this essay will discuss in detail regarding the hierarchy of the strategic decision-making process to enter into Myanmar by means of three leading strategic models which are institution-based theory, Porter's industry-based model, and resource-based approach. This essay will then provide recommendations comprise the suggested entry and ownership strategies to be considered by the company. Last of all, aspects and details within these topics will then be concluded.

2.0 ANALYSIS

Strategy formulation comprises the planning and decision-making which leads to the establishment of the company's goals and the development of a strategic plan (Hodgetts-Luthans, 2005). These includes identifying external opportunities and threats into their long term objectives and therefore, generate, evaluate and select the strategies that best fit strategically for the company. Below are the leading strategic models in order to guide decision making.

2.1 INSTITUTION-BASED THEORY

The institution-based theory treats institutions as independent variables which focuses on dynamic interaction between institutions and organizations, and ponder strategic choices as the outcome of such an interaction (Peng, 2002, as cited in Oever, 2009). Therefore, it is acknowledged that strategic choices are not only bounded by industry conditions and firm-specific resources, but also by formal and informal constraints which would then lead to existing and potential risks and influences in the host area, in this case faced by Starbucks entering Myanmar. The institutional factors that may pose a threat are as below.

2.1.1 POLITICAL RISK

The political risk is the risk that the host country fails to provide a stable legal and regulatory environment, therefore significantly harms the investment (Bonell, Carroll, Kelp, & Ye, 2013). Based on the Political Risk Index by risk consulting firm Maplecroft, Myanmar is ranked the 5th in the world and is rated as extreme risk (Marsh, 2013). One of the main prevalent issues is due to corruption which poses a difficult operating environment for foreign investors. It is stated that even in 2012, corruption watchdog Transparency International ranked Myanmar as one of the world's most corrupt nations (Mahtani, 2013). Other issues include communal violence and a government bureaucracy that is ranked bottom by Transparency International put early investors at substantial risk (Wettach, 2013).

2.1.2 TRADE BARRIER

Myanmar do impose reasonably high import tariffs, however as Myanmar is a member of ASEAN, it is required to eliminate nearly all its import duties by 2015 as part of the ASEAN Economic Community initiative (Vanderbruggen, 2013). Moreover, Myanmar has to abide by a stringent schedule of reduction of import duties under the "AFTA Plus" agreements, the free trade agreements that ASEAN concluded (Vanderbruggen, 2013). Hence, as trade barrier is reduced, this will attract more foreign...

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