Value Chain Model in Starbucks Industry

VALUE CHAIN MODEL

Porter's value chain analysis carries various activities like primary and support activities. The value which is developed and captured by the organization is the “profit edge” and it depicts a formula:

value created and captured - cost of creating that value = Margin

It states that the more value create by an organisation is more profitable for it and when the more value is provide to customers develop competitive advantage for company (Barros and Ferreira, 2017). This concept is very popular in the business world because it helps in creating the huge possible value for the customers. By considering this, companies purchase raw materials in order to provide value to customers with is worthy as it add value to the services. For example, in manufacturing in which the producer adds value by considering raw materials in order to convert it for those people who willing to pay money for it. This idea is important for service industries as they put time, knowledge, appropriate tools and techniques in order to create services to the person who is being server that is the customer. Overall, it describes that more value is provided by the company more people are willing to pay for the services at their own price.

Businesses who seek competitive advantage turns themselves towards the value chain models as it help in identifying the opportunities which helps in saving cost and make differentiations in their production cycle (Briones Peñalver, Bernal Conesa and de Nieves Nieto, 2018). By considering current business situation it demonstrates the cost which is required in order to build the market but it is quite difficult because the demands of customers grow in the complexity and also increases the competition in the market. Moreover, the method of techniques and communication has changed the model since Michael Porter make changes in the value chain model in 1985. But also after progress and modifications, this analysis is still sound in order to identify the opportunities of the market and also achieve the differentiation in competition. It is a chain which streamlines the process which take the product to the market as it connect both the structure and effective communication among direct, indirect and support activities. Direct activities include the recruiting and training of human capital and also support indirect activities such as quality control and record keeping.

STARBUCKS

In terms of Starbucks they does not take it as a stiff model because they assign the equivalent value to all the activities. In Starbucks, the value chain investigation is required in order to gain that all the actions and functions does not need scrutiny at the same level. Hence, to adopt Porter's value chain framework for company, it is important to identify its importance as the activities (Teoh, Lee and Muthuveloo, 2017). In this section the advantages and challenges are discussed as it is helpful for company while using this model which are mentioned as:

Advantages

For Starbucks value chain analysis help in its planning process as because of this it is possible to identify the competitive advantage and achieve it. The Company collects various activities which are related to some extent as Starbucks cannot related or consider all the activities because they cannot trade all the activities in the external market (Tregidga, Milne and Kearins, 2018). It describes that company can consider this because by adopting this company can become a barrier for the new entrants or its competitors. Moreover, they also link or develop interrelationship among these activities in the same organisational unit and also the business units of similar or different entities. This analysis is useful for company in order to identify new opportunities and also reduce macro environmental threats. Moreover, evaluation of the value chain fills the essential gap which may influence the productivity of firm. As in “Starbucks” it increases the flow of material and also improve the demand and sales forecasting. In addition to this, the value chain in Starbucks improves the competitive strategical decision making procedure and it helps in choosing the right competitive strategy and also require knowledge about the cost of rival's structure.

Disadvantages

The major disadvantages of value chain analysis of Starbucks is that the organisation may lose its imagination and the scheme by classifying its trading operations into various activities (Brunton, Eweje and Taskin, 2017). They also divide both the activities which are not separable because of the increased in complexity. Moreover, this process is time consuming because it is difficult to find the required information. Starbucks face difficulties in order to get needed information as if the business information method is not organized respectively.

Internal Environment

The Internal environment is the part of business environment as it is made up of different factors which is present in the organisation which influence the choices, actions and decisions of Starbucks. This environment depicts the climate, culture, machines and managerial practices. In the context of Starbucks, it include two “activities” which is primary and support as it is mentioned as under:

(Source: Starbucks as an Example of the Value Chain Model, 2019)

Primary Activities

These activities are involve in producing and selling of goods to targeted consumers and also improve the overall performance of Starbucks which are mentioned as under:

• Inbound Logistics:

  It is essential to build a strong bond with suppliers because it is necessary to have it in the stores as it help in receiving and distributing products. Without determining it, Starbucks can face different challenges in order to develop their products in various phases (Brookfield, 2017). Examination of in-bound logistics need that a company should focus on each and every aspect in order to transform the raw substantial to smooth products. For instance, inbound logistics retrieve the raw materials and store its inputs and internally administer the raw materials to commence the production process.

• Operations:

  It is essential to determine because when the raw materials come then Starbucks is start its process in order to convert the raw materials to produce the finished product to the market. Machining, enclosing, collecting and testing are some examples of operational actions. Determination of operational activities are important in order to increase productivity, efficiency and also make sure the competitive success.

• Outbound Logistics:

  It include those activities which helps in delivering the product to customers by crossing the various intermediaries. Its actions include material management, repositing, programming, transporting and delivering (Hassanien and Dale, 2019). By this, Starbucks determine the point of competitive advantages and also achieve the business growth objectives.

• Marketing and Sales:

  In this stage, Starbucks highlight the various goodness and distinction aspects in order to offer the products in order to persuade their “customers” which is offering better services to their competitors. For this, the sales factor and marketers plays an important role in order to promote its products by various methods such as advertising, pricing, promotional and building relations with various channels.

• Services:

  Two services offered by Starbucks that is before sale and after sale in order to develop the loyalty of customers. By considering the modern customers they prefer after sales services because it is important for selling and promotional actions. For this, the company need to determine the support activities in order to avoid detrimental brand repute and use various tools in order to spread positivity.

Support Activities

These activities plays an efficient role in order to coordinate and facilitate with the primary activities and it is beneficial for Starbucks which is mentioned as under:

• Firm Infrastructure:

  It describes the range of activities like quality management, handling legal structures, accounting, financing and many more. Excellent infrastructure management allows Starbucks to analyse the value of the entire value chain (Papadas and et. al., 2019). For this, Starbucks control these activities in order to beef up the competitory edge in the market.

• Human Resources Management:

  Starbucks determines its human resources by evaluating various aspects of HR which include recruiting, training, rewarding, performance “management” and many more. Effective management allows Starbucks to reduce the pressure which is based on the skills of workforce. The dependence of company on their workers talent will improve the importance of the value chain support activities.

• Technology Development:

  The integration of technology in manufacturing, delivery process and human resource actions which are required by Starbucks in order to gain the value of technology and its development. It include various departments such as automation software, customer support service, designing of the product, research and development and many more (Lindholm, Laine and Suomala, 2017).

• Procurement:

  This process include the purchasing of inputs which ranges from equipments, machinery, raw materials, supplies and other related items which are important in order to produce the final products. Because of this linkage Starbucks consider the procurement activities in order to optimise this valuable chain.

Also Read - Value Chain Model Analysis

Reflection On The Value Chain Model

Value chain investigation is a technique which is useful in order to determine the internal actions of the company. Its objective is to recognise the most precious state which becomes the source for firm in order to differentiate its advantages as it help in order to supply the competitive point. The entity which competes by the distinction advantage will always try to execute its “actions” which is better than its competitors (Park, Lee and Chae, 2017). If the company competes through cost advantages they will perform inside actions at low cost than competitors. It describes the use of primary activities and also add the values in order to directly conduct the production process as this activities are not more essential than assist activities. In modern times, competitive edge depicts the improvements in technology or innovations in the business model in order to process the performance. Hence, these support activities include the information scheme and research and improvement or general administration which is the important source of distinction advantages. This concept helps in order to understand and separate the use which helps in gaining the competitive edge and wasteful activities as it describes each step in order to develop the product (Barros and Ferreira, 2017). From the above discussion, application of Porter's value chain framework is reckon on the agreement and value of all the actions and after “apprehension” the value in order to analyse the value chain framework, Starbucks need to highlight those areas which create value and adds them for attaining cost efficiency and the grounds of distinction can be set and also processes it.

CONCLUSION

From above “discussion” it is concluded that the business environment is a kind of atmosphere in which all the organisational activities regulates and it is classified into two parts which is external and internal. This report is based on the internal environment and describes the value chain model and its advantages for the company. Moreover, it describes the various activities which is used by the company like primary and support and also depicts that how it is useful for the company. Lastly, it conduct the reflection of the value chain model which defines the use of this model in order to understand the business en

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