Assessing and Managing Risk of Starbucks Inc.

Any organization must conduct risk analysis and management. The industry, business model,
competitors, and target market must all be considered when assessing risk. Although these are the primary
variables that affect the emergence of risk in a company, the competitive world is dynamic and calls for
high levels of innovation and extensive market analysis to discover and prevent potential risks that could
interfere with business operations. Established 50 years, Starbucks is one of the leading and iconic
American beverage companies with a presence on the global market. However, in the wake of increased
competition and growing technology, the company must prioritize risk analysis to continue making
strategic decisions and investments.

Strategic Alternatives Assessment Recap

A SWOT analysis was used to evaluate Starbucks’ strategic choices to find prospective growth
prospects and consequently plans for the company. The options were determined depending on how much
of an impact they had on the SWOT analysis’s stated factors. Market policies and diversity and inclusion
as alternative methods are rated best for their practicality. Perhaps, this is because any suggested
alternative strategy’s ability to be implemented practically is crucial (Lemus et al., 2010). Additionally,
the company’s technology developments have enabled it to be successful in its international marketing
initiatives. To compete in the market, the organization uses the most recent technology. However, many
customers believe Starbucks overcharges for coffee and turn to alternatives like tea or other beverages.
Additionally, due to the company’s avoidance concerns, its rivals have a poor impression of it. Moreover,
the company’s tax avoidance issues have damaged its reputation.

Strategic Alternatives and Associated Risks Information Gaps

Although Starbucks has been advised against using some methods, certain data is necessary to
make the recommendations. For instance, formulating recommendations can be aided by analyzing data
for organizational growth. The focused approach makes sense and educates decision-makers on the

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crucial tactics they should use to enhance business. To make recommendations, further diversification of
data is also required. Understanding the proper methods companies can employ to diversify their
production with information on concentric and conglomerate diversification is helpful.
In that regard, Starbucks lacks some information that can be useful in developing value-added
strategic alternatives, potentially risking destabilizing and liquidating it. Nonetheless, Starbucks’s
strengths emanate from its stability. Information on liquidity aids in understanding how the firm can boost
its market liquidity, and this knowledge aids in creating and recommending suitable strategic value-added
options. Information about the contemporary world is needed to assess and manage the potential hazards
of suggested alternatives. This includes an accurate view of technological developments and how they
affect corporate operations directly. The risk factors connected to the proposed options might be
evaluated with this information (Geereddy, 2013).
Starbucks also upgraded its marketing with a recent decision to lay out its goals for increasing
exposure and growing its clientele. The company is aware of the need for change, thus picking employees
with experience in marketing tactics. The firm focuses on external growth since it wants to grow the
clientele and make the business more well-known worldwide (Geereddy, 2013). As a result, the
corporation has several shortcomings, including a lack of unique and in-demand products. People today
have a wide range of beverage options; therefore, Starbucks must work to persuade the world that it is
necessary to do business with them. The corporation wants to establish itself as one of the most well-
known brands in the world. The company’s strategy to accomplish this goal is to expand into developed
and developing markets.

Financial Analysis Recap

Analyzing finances is crucial for business operations. For instance, strategic alliances guarantee
the creation of numerous revenue streams, boost competitiveness, and secure the acquisition of a new
consumer base. Starbucks created this partnership with multiple businesses like Pepsi, Barnes, and others,

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and such alliances can boost Starbucks’ financial performance. A company’s status, solvency,
performance, and risk management are visible through financial ratio analysis. Starbucks’ net profit
dramatically increased to 14.5% in the year 2021. However, the corporation anticipates that its adopted
strategy will continue to boost its profit margin. As a result, the company’s revenue will keep rising.

Financial Assessment Update

Markets for financial products are constantly evolving, and Starbucks should conduct a recent
search to refresh and improve its current performance evaluation and strategy. First, it demonstrates how
much Starbucks’ net profit increased by 14.45% in 2021 (Lemus et al., 2010). This shows that Starbucks
has improved significantly concerning raising its net profit margin. Clearly, the business has partnered
with Nestlé in terms of strategic partnerships, and it is currently focusing on China for its international
expansion. The way risk is evaluated and managed at Starbucks has also been impacted by the discovery
of this new strategic alliance because such relationships and expansions always carry a certain amount of
risk.

Decision matrix Applicability

A decision matrix can detect risks and suggest strategic choices since it makes it easier to see the
severity of risk factors and decide what needs to be prioritized. The cost of potential alternatives,
predictability and growing potential returns are all factors that must be considered in Starbucks’
evaluation matrix. These variables affect choices, such as marketing strategies, diversity, and inclusion
initiatives (Lemus et al., 2010).
The decision matrix might be considered a valuable tool for risk prediction. This is because it
evaluates the severity of risk variables before putting the suggested management plan into practice. The
risk intensity of a strategy is rated from 1 to 5, with 1 having the most negligible impact and 5 having the
most significant impact. For instance, a marketing plan should ensure that the business is well-known
globally, making it simpler to attract clients. Because incentives have a strong marketing plan, they can be

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worth more. As a result, the decision matrix aids in determining how risk may affect the execution of this
strategy.
The decision matrix will profoundly influence the strategy I have selected. This is because
additional methods have been used, particularly new search techniques and improved financial analysis.
The matrix displays unknown risks and their severity for particular approaches, making the alternative
strategy that is least affected the most suitable.
Risk Inclusion and Diversity Marketing
Technology Changes 3 5
Cost 2 3
Fluctuation of Prices 4 3
Cultural Differences 3 2
Potential Reach 1 4
Competition 3 3
Complementors 2 1
Practicality 5 5
Government policies 3 3

Critical Risk Impacts

Understanding cultural diversity and technological change pose the greatest risks. Of all,
technical advancements are the main factor on which marketing incentives in the global community
depend; therefore, failing to adapt to these changes may reduce their effectiveness. Therefore,

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technological advancements may at any point have an impact on alternatives. Understanding cultural
differences is the second component that has the most significant impact on inclusion and diversity
policy. Its effectiveness may be constrained by a lack of comprehension of various cultural norms or
client needs in different markets (countries). Due to its vast target market, Starbucks must research and
develop bespoke strategies for appealing to other people in different countries.

Conclusion

In a nutshell, this essay has discussed Starbucks’ risk assessment and management practices. Any
organization needs to analyze and manage risks. Information regarding the industry, corporate structure,
competitiveness, and target market is the foundation for the risk assessment. Marketing and supporting
diversity and inclusion policies throughout the company are two strategic possibilities for businesses.
However, different risk factors tend to have an impact on this technique. The frequency of this risk
assessment should be maximized. For instance, an increase in Starbucks’ net profit to 14.45% in 2021
demonstrates that Starbucks has significantly improved its net profit margin. This adjustment is expected
to influence how the decision matrix is utilized to identify the driving forces behind adopting alternate
strategies. Among all the risk variables, understanding cultural differences and technology change is the
risk that has the most significant impact. These risks must be addressed through extensive study To
guarantee that businesses do not execute alternative methods incorrectly.

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References

Geereddy, N. (2013). Strategic analysis of Starbucks Corporation. http://scholar. harvard.
edu/files/nithingeereddy/files/starbucks_ case_analysis. pdf.
Lemus, E., von Feigenblatt, O. F., Orta, M., & Rivero, O. (2015). Starbucks Corporation: Leading
innovation in the 21st Century. Journal of Alternative Perspectives in the Social Sciences, 7(1),
23-38.
Roby, L. R. (2011). An analysis of Starbucks as a company and an international business.
https://digitalcommons.liberty.edu/cgi/viewcontent.cgi?article=1237&context=honors