The External Forces and their Importance

Discuss About The Strategic Resource Practice Implementation.

The success of Starbucks Coffee is solely based on its efficiency in addressing the impact of external forces on the on the environment of the organization. From the very beginning Starbucks has been addressing the impact of the external forces outlined in the Porter’s Five Forces Model. In this regard the Five Forces Analysis has proved to be beneficial in revealing the vital issues faced by the managers of the industry.  In a globally challenged environment it is important on the part of the industries to identify various external forces that could relatively harm the employees working in such organization (Chen, Preston and Swink 2015). The external forces can be emphasized below:

Managers should be aware of the present competitors of their business sector. There is a huge possibility on the part of competitors to acquire market shares at any expense (Mishra, Boynton and Mishra 2014). Therefore, it is important that managers should engage themselves in protecting the market shares. Managers should be aware of every step taken by the competitors (Ahearne, Lam and Kraus 2014). In this regard, they should acquire relevant information about their sales, pricing, promotions and customer service initiatives.

It is essential that managers should have a clear knowledge regarding the existing laws which could affect the operation of their companies (Ruiz-Palomino and Martínez-Cañas 2014). It is important to note that if the managers adhere to these existing laws and regulations the functioning of the business shall run smoothly. In this regard, mention can be made of the existing environmental legislations that affect the businesses of organizations to a large extent. Managers should understand the importance of the existing legislation on the business operations.

For the purpose of efficient functioning of the business it is important on the part of the managers to have knowledge regarding the recent technological changes (Sikora and Ferris 2014). It is noteworthy to mention here that in order to reduce costs by increasing productivity and efficiency it is important that the managers of an organization should shift to new technological innovations (Muenjohn and Armstrong 2015).

It is important for the managers to have a clear understanding regarding the skills and efficiency of labors with the help of which the business of the organization shall run effectively (Hueske, Endrikat and Guenther 2015). In order to run their business smoothly, managers should identify skilled labors and recruit them (O’Toole Jr and Meier 2014). In this regard, managers should engage themselves into various programs of recruiting suitable candidates from educational institutions into their organization.

Managers should understand both economical and geographical concerns affecting the business (Campbell and Göritz 2014). Managers must develop clear understanding regarding the prevailing geographical factors which affects the concerns of the investors (Csikszentmihalyi and Sawyer 2014). In some cases investors divert themselves from investing in a business located in an unfavorable environment.

The managers are at the authority to identify these external factors. In this regard, the Porter’s Five Forces analysis has been applied by the managers of the organization in determining the nature of the external forces which involves- Rivalry, Bargaining Power of Buyers, Bargaining Power of Suppliers, and Threat from new Entrants and Threat of Substitutes (Stensaker 2015).

Addressing Competition

In order to explain the impact of the five forces analysis on the managerial activities of the managers and the organization in which they are working it is essential to present an illustration of a diagram.

It is evident that Starbucks faces competition from major competitive forces like McDonalds and Costa Coffee. However, there exists other industries offering the same services as Starbucks and therefore the company has a large number of competitors in its field. There is a presence of strong force of competition for Starbucks and therefore there is an opportunity for customers to easily shift to other brands. Therefore, it can be noted that there is a tough competition between Starbucks and the rival companies in the marketplace as Starbucks has been dominating the marketplace for a long time. Therefore, managers should address the issues relating to competition between different companies and adopt favorable measures for the benefit of the organization.

The bargaining power of buyers is the most significant external force that could affect the environment of Starbucks industry. In case of Starbucks various external factors contribute equally to the bargaining power of the customers. However, the most important among them are low switching cost, availability of substitute products and irregular buyers. There is a possibility on the part of the consumers to shift to other brands as there is an existence of other notable brands in the market. Therefore, the managers of Starbucks are at the responsibility to focus on individual purchases and compare them with the total revenues of Starbucks Coffee.

The suppliers also have significant impact on the external factors of the industry (Jackson, Schuler and Jiang 2014). In this regard mention can be made of the factors which contribute to the bargaining power of suppliers. Due to the existence of large supplies and high variety of suppliers in the marketplace it creases significant affect on the supply policy of the industry (Starbucks.com 2018). However, the managers have efficiently diversified the supply chain of Starbucks in order to reduce the influence of the suppliers on the internal business of the company. In this regard, it is worth noting that in spite of moderate influence on the part of the suppliers it is not required for the managers to prioritize the demands of such suppliers.

In recent times, Starbucks is facing potential threat from new and small scale companies as well. However, due to the emergence of new players in the marketplace Starbucks have faced moderate competition. It has been observed that as a result of the emergence new industries in the marketplace Starbucks can face competition because it has already developed moderate business costs of its own and therefore it is not possible to make relevant changes. However, it would be difficult on the part of the new entrants to compete efficiently with well-known brands like Starbucks. It can be noted that as the cost of shifting to the substitutes are low therefore the customers of Starbucks would not be able to switch to new products within a short time.

Adhering to Regulations

It is worth mentioning that Starbucks experiences strong competition from substitute products. It can be noted that in a global marketplace with the emergence of various substitutes of goods and services can make favorable impact on the internal environment of Starbucks. The managers have identified the external forces which pose as a major threat to the industry. The external factors are low switching cost, low switching substitutes and availability of substitutes. There is a possibility on the part of the consumers to shift towards substitutes like bottled beverages. However, the cost of shifting to substitutes is relatively low as the managers do not spend huge amount on shifting process. It can be observed that the substitutes which exist in the market at present costs less than the products of Starbucks. Therefore threat of substitutes should be considered as a major external force by the managers.

The influence of the five forces depicted in the Porter’s Five Forces Model has been influenced by Starbucks Coffee. It is noteworthy to mention here that each factor has varying force and vitality on the internal environment which is based on the position f Starbucks in the market.

Porter’s Five Forces	Affect
1.      Rivalry.	Strong Force.
2.      Bargaining power of Buyers.	Strong Force.
3.      Bargaining of Suppliers.	Weak Force.
4.      Threat of New Entrants.	Moderate Force.
5.      Threat from Substitutes.	Strong Force.

Figure: 1 [Challenges faced by Starbucks regarding the Five Forces].

Source: [Created by the Author].

It can be stated that various challenges are linked to the abovementioned Five Forces. The managers are at the obligation to identify those challenges and address them efficiently. In this regard, it can be mentioned that the company Starbucks faces a strong force of competition from its rivalries. Starbucks also experiences the strong force in case of bargaining power of the buyers however in case of bargaining power of the suppliers it faces the weak force. The company faces moderate force from the entry of newly formed organizations. However, in case of substitution it experiences strong force regarding the threat of substitutes. It can be observed from the abovementioned table among all the Five Forces, the company is least concerned about the bargaining power of the suppliers. However, it is important that the managers of Starbucks Coffee ensure effective measures for the purpose of prioritizing the rivalry with the competitors, the power of bargaining of the buyers and the threat of substitute products.

References:

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