A324KM Business Management Strategy

Jacky (G0209712K)

COVENTRY UNIVERSITY
Faculty of Engineering and Computing BACHELOR OF ARTS (HONS) IN LOGISTICS MANAGEMENT

A324KM Business Management Strategy COURSEWORK

STUDENT NAME STUDENT ID NUMBER LECTURER

: Jacky : G0209712K : Jenny Yeung

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A324KM Business Management Strategy

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Word Count

Number of pages: 05 Number of words: 2292

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A324KM Business Management Strategy

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Abstract
This is a coursework from module of Business management strategy. In this coursework, I have to address questions given by the lecture by doing some data research and note down as an essay format. The food and beverages industry is main focus for the question. I have selected the non-alcoholic beverages industry for the industry analysis by using Coca-Cola, Pepsi, and Starbucks as the example to explain further for each component in the industry analysis. Lastly, the selected firm for the SWOT analysis and Porters generic competitive strategies is Starbucks Coffee.

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Content Page
1. Introduction............................................................................................................................................5 2. External Environmental Variable..........................................................................................................5 3. Industry Analysis by Porters Approach................................................................................................6 3.1 Threat of Potential Entrants .............................................................................................................6 3.2 Competitors among presents firms..................................................................................................7 3.3 Threat of Substitutes........................................................................................................................7 3.4 Bargaining Power of Buyers............................................................................................................7 3.5 Bargaining Power of Suppliers........................................................................................................8 3.6 Relative Power of Other Stakeholders.............................................................................................9 3.7 Summary..........................................................................................................................................9 4. SWOT Analysis.....................................................................................................................................9 4.1 Introduction......................................................................................................................................9 4.2 Strength............................................................................................................................................9 4.3 Weakness.......................................................................................................................................10 4.4 Threat.............................................................................................................................................10 4.5 Opportunity....................................................................................................................................10 5. Competitive strategies..........................................................................................................................11 6. List of reference...................................................................................................................................12

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A324KM Business Management Strategy

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1.

Introduction Food and beverages industry is considering of processing of raw food material into edible product, then its packaging and products distribution. The largest sections of the food and beverages employees are in the restaurants and bars sectors including the hospitality industry such as hotels, resorts and casinos. According to a report from Singapore government, the food and beverages industry has contributed S$1.91 billion or 0.74% to the Gross Domestic Products of Singapore (EnterpriseOne 2009).

2.

External Environmental Variable There are many important external environment variables that affect the food and beverages industry. The first variable is from the political and legal aspect, such as the law & regulation (EnterpriseOne 2009). Halal certification is a process which is being creditable by an Islamic body to certify that products are lawfully consumable by the Muslim. In Singapore, since its a multiracial country such as Chinese, Malays, Indians and Eurasians (Singapore Expats 2010). As we know, most of the Malay in Singapore is Muslim therefore there is a need to consume Halal certify product (Majlis Ugama Islam Singapura 2009). By having such certification, it allows company to serve their products to all groups of people including the Malays thus demand is increasing and firm is able to supply as it is certified. The second variable is sociocultural such as lifestyle and health care. In todays fast-faced, we are being exposed to lots of fast food or so called the junk food. However, recently there is an increase number of consumer who is health conscious such as eating organic food, the animal welfare organisation is also encouraging consumer to go vegan (Cision 2011). Having such lifestyle will affect the companies products such as a fast food restaurant who is selling burger. Health care is one of priority in current lifestyle, such as the current disaster in Japan and causing the spread of radiation to the sea water which affected the seafood industry and vegetables as well. From a new report, China and other countries in the world is banning products in any form for importing to its country due to radiation (Singapore press holdings Ltd 2011). The Food and beverages firm which is serving Japanese cuisine will be heavily affected due to such consciousness.

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The third variable is economic, such as economic development and GDP trend. The food and beverages industry contributed 0.74% to the GDP of Singapore in year 2008 (Spring Singapore 2009). Since 2004 to 2008, the contribution of GDP from this industry has significantly grown from 0.71% to 0.74% (Spring Singapore 2009). Due to such growth, the industry have gained support from government support such as the WSQ culinary scholarship which worth some SGD$4.36 millions (Singapore Information Services Pte Ltd 2005). Spring Singapore, a government body in Singapore is giving out a SGD75 million fund injections to boast the productivity for the food and beverage industry (Spring Singapore 2009), such as a Chinese restaurant chain is going to implement a cutter machine to save up the man power cost (Singapore press holdings Ltd 2011). 3. Industry Analysis by Porters Approach

3.1 Threat of Potential Entrants Potential entrants or newbie typically increase capacity for the industry, an aspiration to secure market share, and substantial resources. For an established corporation, it could be a threat for them. Its threat of the newbie is dependence to the existence of the barriers of entry and the response that can be foreseen from existing competitors. An entry barrier is an obstacle which creates it not easy for a firm to come into the market or industry. According to Porter (1985), taking into the feasible barriers to enter are: the economies scale, differences of Ownership of product, identification of brands, costs switching, government regulations, expected non-acceptance; resources requirements; contact to the network of distribution; total return of investment (access to necessary inputs; proprietary low-cost product design and proprietary learning curve). Present barriers for the entry into the industry involve highs variable and fixed costs at the end of activity. It is also dependence on the governmental policy or rules of the states or counties where the companys location is, due to the construction; allocation and trade are dependence on many laws and policy outside of United States and European Union such as Singapore. All firms are conditional on several regulations and environmental policies.

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3.2 Competitors among presents firms According to Wheelen and Hunger (2000), in most markets, industries, companies are communally reliant. A significant progress by a company can be expected to have an obvious outcome on its opponents therefore it may result in counter efforts. Porter (1985) defines the following competition discoveries among present company in an industry are development of the industry, storage or fixed costs and value added, the discontinuous variations, merchandises differentiations, identification of brands, costs of switching, company stakes, focus and steadiness, informational complication; variety of competitors, exit barriers. There is competition between the presence companies because of universe and to number of competitors. But there is competition between the companies for case of products with comparable features such as Pepsi-cola and Coca-cola or Starbuck and Coffee beans, and in the reality of the exit barriers are high. 3.3 Threat of Substitutes Substitute products are different kind of merchandises from the appearance however able to serve the similar need as merchandise. Substitutes bound to the prospective returns of an industry by introduction of a maximum on the prices firms in the industry can profitably charge. To a degree that costs switching are low thus it may have a powerful impact on an industry. For Byars (1991), substitute products that ought to have the majority interest from a business is those have tendency of improving their price performance trade-off with the industrys products and are created by industries making high returns. There is threat of substitute products or services, by fact in these Non-alcoholic beverages are existing merchandise in the market that is on the rise for development for case of products like Coca-cola, Pokak, Coffee and Tea for illustration. 3.4 Bargaining Power of Buyers Buyers influence an industry through their capability to press down prices, bargaining power for higher and better quality or even additional forces, and play opponents against each other (Wheelen and Hunger, 2000 and 2006). A buyer and a group of buyers are strong if any of the below factors hold true:

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A buyer buys a great amount of the sellers merchandise or service for example: tires bought by a key automaker. A buyer has the prospective joining together backward by creating the product by itself for example: an automaker can have producing its personal tires or any other kind of spare parts. Alternative sources are overflowing because of the merchandise is undifferentiated and standard for example: consumers can choose among many groceries supermarkets. The threat is high as there are many players or companies in this industry; it is effortless to find other supplier in the industry. Shifting sources costs very small such as: stationeries suppliers are effortless for coming across; Starbuck able to get their coffee beans from Brazil, Indonesia, and even Mexico. 3.5 Bargaining Power of Suppliers Suppliers are able to influence an industry through their capability for increasing prices or decrease the quality of bought products and services. For Porter (1985), the source of supplier powers are the following: different inputs; switching costs of sources as well as companies in the industry, existing alternative inputs, sources concentration, importance of volume to supplier, cost relative to total purchases in the industry, impact of inputs on cost or differentiation, threat of forward integration relative to threat of backward integration by companies in the industry. Byars (1991) does a brief justification of these influences according that considering the sources are strong when their industry is conquered through only a small number of companies and is stronger than industry it sells to, their merchandise is exclusive, distinguish or has built up costs of switching. They pose a realistic threat by integrating forward; Market is not an significant customer of the supplier group. Wheelen and Hunger (2000 and 2006) refers those that Byars (1991) said and additionally the suppliers are strong when substitutes companies are not eagerly present in the market. Threat is going to be low, due to many suppliers or sources in this non-alcoholic industry, there are substitute companies in the industry. However in the case of products supplied for companies with leading position and that is only feasible

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origin for the supply of a merchandise in the market since their bargaining ability is powerful. 3.6 Relative Power of Other Stakeholders According to Wheelen and Hunger (2010), Stakeholders can be an individual or groups who have interests in an organizations capability for deliver the planed results. The group or individual can be the owners, managers, employees, customers, environmental, social, government, suppliers, competitors, and any other parties who have the interest to the organization. In this case, the threat is high comparing to the few year ago. Government has tightened up the policy or regulations for beverages productions. However in Singapore, it is pretty low as Government strongly supporting the industry and there is many bodies to support on the R&D (Spring Singapore 2009). 3.7 Summary The non-alcoholic beverages industry is quite competitive market. There is so many substitutes product, such as Coco cola and Fanta then Starbuck coffee and Coffee Bean. However, Singapore government is very supportive in the R&D to the F&B industry in Singapore by giving fund to help the organization to start up their businesses. 4. SWOT Analysis

4.1 Introduction Starbucks is the largest coffeehouse company in the world (Hoovers Inc 2011) with estimated 17,009 stores as of January 2011 across 50 countries including over 11,000 in the United States, over 1000 in Canada, and over 700 in the UK (Starbuck 2011). 8.870 stores are company owned and 8,120 is licensed stores (Starbuck 2011). The main product of it is coffee which has more than 30 blends and single origin premium Arabica coffees. There are handcrafted beverages such as hot and iced espresso beverages, merchandise such as mugs and fresh food such as baked pastries and sandwiches (Starbuck 2011). 4.2 Strength Starbucks is top professional coffee retailer in terms of markets share and market capitalization as of 2011 USD6.38 billion and sales growth 17.2% (Starbuck 2011). It has a strong network established around the world with 17,009 outlets either company owned or licensed across 50 countries (Starbuck 2011). Its brand is always related with excellence quality of coffee and excellent experience of customer service. Due to the large scale of the company, it has a
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strong buying power over the suppliers hence Starbucks is able to press down the price of the coffee beans. 4.3 Weakness It is a premium brand therefore there is an association to the premium price. As competitive is rising such as McDonalds opened up a new brand which is McCafe thus Starbuck would be undercut by lower price by its competitors. Since it is an American brand, the perception of it is trampling on the social culture such as Starbuck was trampling on Chinese culture (Forbidden City Starbucks closes, BCC, July 14, 2007). The products are over dependent on coffee or coffee related products, this makes them slow to diversify into other sectors should the need arise. The company has a very strong presence in the USA and the three quarters of the outlets are in the home market. There is a need for them to look into other countries market as to spread the risk of business. 4.4 Threat There could be saturations of coffee or caf market, on 1 July 2008, the company announced that 600 company-owned outlets were underperforming then it closed 61 out of its 84 stores in Australia by August 3, 2008 (Starbucks Downside, Wall St Journal, July 1, 2008). In August 2009, there is closure of 300 outlets which were underperformed and the removal of 7,000 job placements (Starbucks to close more stores, Wall St Journal, January 28, 2009). Consumers trends are moving toward a better healthy lifestyle thus keeping away from the caffeine. Since the opening of the conceptions in 1971, it has lead to many new entrants to the market and there is a pool of competitors who copy the brands and its concept. 4.5 Opportunity The company is very good at taking advantage of opportunities. In October, collaboration between Starbucks and Apple in selling music which is similar to that played in the outlets. The company has potential opportunity to venture in to the new coffee market for its global expansion such as India and the Pacific Rim nations are beginning to emerge. Starbuck is focusing on better effectiveness and success from the purchasing of raw material to its supply chain as for having better customer service deliverance (Starbucks 2011).

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5.

Competitive strategies There are three successful strategies mentioned by Porter which are overall cost leadership, differentiation and focus. Starbucks is fit to the differentiation of the generic strategy, as it provides an excellence customer service and a high quality of product. Besides that Starbucks is the leader in the coffee market, thus making such opportunity to differentiate her with other industry players. It can be easily done through keep developing new products and be innovative, yet stay high quality for its products through only selecting the world finest coffee beans (Starbuck 2011). However, there is many small player or new entrant in the current market. Giving todays economic condition, Starbucks could have been surpassed by any of the competitors on the cost and products quality. There is a need for Starbucks to watch closely for the markets new entrants as they can pose challenges to Starbucks in term of quality, service and experiences for the consumers.

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6. List of reference
EnterpriseOne (2009) Food & Beverages [Online] available from

<http://www.business.gov.sg/EN/Industries/FoodNBeverage/index.htm> Singapore Expats.com Pte Ltd (2011) Culture and Language [Online] available from <http://www.singaporeexpats.com/about-singapore/culture-and-language.htm> Beverageworld (2006) State of the Industry Report 2006 [Online] available from <http://www.beverageworld.com/SpecialReports2006/StateOfIndsty/BWStateoftheIndustry-2006. Pdf> (16 March 2006) Byars, L. (1991) Strategic Management: Formulation and Implementation, Concepts And Cases. 3rd edn. New York: HarperCollins Publisher, Inc Certo, S.C. Peter, J.P. 1991. Strategic Management: Concepts and Applications. 2nd edn. Singapore: Mcgraw-Hill International Editions, Management Series Coca-Cola C (2006) Annual Report 2005 [Online] available from <http://www.cocacola.com> (6 May 2006) PepsiCola (2007) Annual Report Performance with purpose [Online] available from <http://www.pepsico.com> (2 April 2007) Porter, M. (1985). Competitive Advantage Creating and Sustaining Superior Performance. London: The Free Press: New York and Collier Macmillan Publishers Porter, M. (1990) The Competitive Advantage of Nations. New York : First Published. Macmillan Press Thompson, J.L.(1993) Strategic Management Awareness and Change. 2nd edn. London: Chapman & Hall Wheelen, T.L. Hunger, J.D. (2000) Strategic Management and Business Policy Entering

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21st Century Global Society. 7th Edn. New Jersey: Prentice-Hall Wheelen, T.L. Hunger, J.D. (2006) Strategic Management and Business Policy. 10th Edn. New Jersey: Prentice-Hall Cision (2011) PETA persuades people to go vegan- dairy free cakes can help to make the transition from a traditional diet to a vegan one much easier [Online] available from <http://www.cisionwire.com/tron-media-limited/peta-persuadespeople-to-go-vegan--dairy-free-cakes-can-help-to-make-the-transition-from-atraditional-diet-to-a-vegan-one-much-easier104779> (5 April 2011) Singapore Press Holding Ltd (2011) China expands ban on Japan food. The Straits Times [Online] available from <http://www.straitstimes.com/BreakingNews/Asia/Story/STIStory_654817.html> (9 April 2011) Majlis Ugama Islam Singapura (2009) Singapore Halal Certification [Online] available from <http://www.muis.gov.sg/cms/services/hal.aspx?id=458> Singapore Information Service Pte Ltd (2005) General Industry Overview: Food and Beverages [Online] available from <http://www.insis.com/Web/main.aspx? ID=0bf2d245-e8c6-46d5-9304-8030e7ca5859> EnterpriseOne (2011) S$75M Productivity Boost For Food Services Sector [Online] available from <http://www.business.gov.sg/EN/News/20110407InvestmentInFoodSectorProductivit y.htm> (07 April 2011) Huang.J(2011) $75m to help eateries cut manpower, up production [Online] available from <http://www.straitstimes.com/BreakingNews/Singapore/Story/STIStory_653740.html> (6 April 2011) Hoovers Inc (2011) Starbucks Corporation [Online] available from <http://www.hoovers.com/company/Starbucks_Corporation/rhkchi-1.html> Starbucks Corporation (2009) Financial Release 2010 [Online] available from <http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irolnewsArticle&ID=1492291&highlight=> (4 Nov 2010) British Broadcasting Company (2011) Forbidden City Starbucks closes [Online] available from <http://news.bbc.co.uk/2/hi/6898629.stm> (14 July 2007)

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