CASE STUDY

STARBUCKS CORPORATION

Group members
Darpan Goswami Durlov Protim Borua Tanvi Hussain Pranami Borah Dimpal Bharali

Overview

Established in 1971 at Seattle, Washington Famous for its quality fresh-roasted coffee beans and stylish atmosphere. Over 16000 stores worldwide Product lines include : beverages (coffee, Tazo tea, ice creams) pastries whole coffee beans music CDs

Timeline
1971 1982 1983

Starbucks opened in Seattles Pike Place Market. Howard Schultz joined Starbucks . Schultz travelled to Italy

1985 1987

Howard Schultz established Il Giornale Coffee bar.

Il Giornale acquired Starbucks and changed the name into Starbucks Corporation.

1992
1996

Starbucks went public at $17 a share

Starbucks Coffee International opens its first non-North American store in Japan at Tokyo

Timeline

1996 Starbucks began selling bottled Frappuccino. 1998 Acquired Seatle Coffee company. 1999 Starbucks acquired Tazo Tea company. 1999 Acquired Hear Music, a San Francisco-based company 1999 Starbucks opened in China(Beijing) 2002 Starbucks opened in Mexico ( first store in an origin country)

Mission Statements
Company Mission Statement:

Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.

Environmental Mission Statement:

Starbucks is committed to a role of environmental leadership in all facets of our business.

SWOT
Strengths

Efficient Management Sound financial position Valued and motivated employees Effective distribution channel Increase in Product line Good corporate image Well trained staff Industry market leader Ambience of Starbuck stores

Weakness
Profit generation slowed down Product pricing(expensive) Size Promotion strategy Self cannibalization

Opportunities
Emerging International markets Good relations with suppliers and partners Satisfied customers High visibility locations Local themed food items Alliance and acquisitions Exclusive purveyor of Narino Supremo

Threats
US market saturation Antiglobalization Fierce competition Media Cultural and political issues in Foreign countries

Core Competencies
Starbucks branding High quality Good reputation Ability to innovate, adapt to the culture Product: adapt to the taste Service: maintain the customer loyalty Value creation Customers Employees Suppliers

Issues :

The problem is anti-globalization which makes more difficult for Starbucks to enter in new markets Symptoms:

Protests from anti-globalization activists Those activists have enough media power it leads to international scandals. They receive push-backs in new markets

Analysis using porters five forces model

Threat of substitution

Other beverages apart from star bucks coffee and tea include soda fruit juice, water, beer and other alcoholic drinks Lower end or less luxurious coffee places Places that offer people a place to hang out, chat, relax or even work e.g. tea houses, fast food places, bars.. Entry barrier for coffee industry is relatively low, even for premium brands like star bucks Threat of new entrants include fast food chains such as McDonalds, Burger King etc.

Competitive rivalry

Other coffee chains. examples include Caf Nero, Coffee Republic & Costa Coffee. Smaller privately owned coffee houses Secondary coffee houses like McDonalds, Burger King etc.

Bargaining power of suppliers

Low bargaining power of suppliers due to importance of star bucks business to any individual suppliers Suppliers of plastic products like cups,napkins,lids etc have little amount of bargaining power as large amount of alternatives are available With new entrants like McDonalds who claim to offer premium roast coffee of reasonable quality for lower price which increases the bargaining power of buyers

Starbucks Strategy
Rapid store expansion strategy
Domestic store expansion Starbucks everywhere approach International store expansion Company-owned and company-operated stores or licensing Created a new subsidiary, Starbucks Coffee International Expanded its consumer products channel in Asia Pacific region

Starbucks Strategy
Employee Training and Recognition Systems to recruit, hire and train baristas and store managers training programs awards for partners Store Design, Planning, and Construction High-traffic, high-visibility store locations Control of average store opening costs

Starbucks Strategy
Store ambience
The concept of everything matters
Assessment of standards

Starbucks Strategy
Product Line
Wide range of products choices Selling music CDs Joint ventures PepsiCo Dreyers Grand Ice Cream Acquisitions Hear Music Seatle coffee company

Financial Analysis

Proprietory ratio or equity ratio= Shareholders fund/ Total assets= 0.75 Gross profit ratio= 73% Operating ratio= Cost of goods sold+ operating expenses/net sales *100 = 57.45% Debt-equity ratio= outsiders fund/shareholders fund=0.003

Recommendations

Increase spending on advertisement Create a specific brand for European expansion, or acquire an already well established brand with still growth potential left Expand and enhance the existing network by targeting new markets Rethink their blanket strategy Involvement in more social responsibility campaign They should come up with more food products

Starbucks should come up with more vending machines in places of high footfall They should establish coffee lounge with sections dedicated to movies, music, books in big cities They should also increase its presence in developing countries Try to develop good relations with NGOs

Thank you