starbucks
Post on 21-May-2015
1.221 Views
Preview:
TRANSCRIPT
Adam Berger, Justin Buchman, Donald Chase & Suzana Hsu
StarbucksPresented by:
THE FRAPPUCCINOSTHE FRAPPUCCINOS
The Frappuccinos
Presentation Outline
Introduction to Starbucks Industry Overview Company Overview Site Analysis Recommendations for Improvement Focused Recommendation for Improvement Final Action Plan Impact Analysis Wrap Up
The Frappuccinos
Introduction to Starbucks
Company started in 1971 in Seattle, Washington
Grew from 55 stores in 1989 to over 2,200 stores today
Products sold include:- beverages - pastries- whole coffee beans - coffee-related retail items
The Frappuccinos
Industry Overview
The Frappuccinos
Industry Definition
Specialty Eatery Industry– Fits within the largest segment of disposable
income spending -- food and beverages– Steady growth in this segment in the 1990’s has
led to an abundant number of new companies– As demand for convenience has made eating
out a normal routine, the demand for specialty food services has increased in recent years
The Frappuccinos
Industry and Competitive Analysis
Market Structure– Monopolistic Competition
Competitive Activity– Many companies are in the market and competition is fierce
– Competitors use location, product mix, and store atmosphere differentiation to establish market niche
Industry Costs and Capital Structure– Low to moderate costs for each location
– Major start-up expenditures are property and equipment
– Major operating costs are labor and cost of sales
The Frappuccinos
Industry PEST Analysis
Political Influences– Relationships between coffee producing nations and US
– State & Local government controls
Economic Influences– Constant demand for food and beverages
– Changes in disposable income could influence purchase levels
Social Influences– Consumer preferences could shift from coffee to other beverages
Technological Influences– Use of technology can improve operational efficiencies
The Frappuccinos
Company Overview
The Frappuccinos
Starbucks Corporate Strategy
Maximize market penetration Provide a relaxing, attractive social
atmosphere Offer high-quality products Create a great working environment Achieve profitability
The Frappuccinos
Starbucks SWOT Analysis
Strengths– Largest market share in industry
– Differentiated atmosphere
Weaknesses– Aggressive expansion could lead to managerial / financial problems
Opportunities– Whole bean sales in supermarkets
Threats– Lack of ownership of coffee farms can lead to price fluctuations
The Frappuccinos
Company Financial Performance (1998 FY)
Revenues $1,308.7 million (% of Sales)
Gross Margin 195.7 million 15%
Pre-tax Profit Margin 116.4 million 8.9% Net Income 68.4 million 5.2% Return-on-Assets 8.7% Return-on-Equity 11.0% Debt-to-Equity 0.04 12 mo. Revenue Growth 28.4%
The Frappuccinos
Company Financial Performance (1998 FY)
-10%-5%
0%
5%
10%
15%
20%
25%
30%
Net ProfitMargin
ROE ROA Debt/Equ 12-Mo RevGrowth
Industry Starbucks
The Frappuccinos
Site Analysis
The Frappuccinos
Site Characteristics
Leased store located on Central Street in Wellesley Store has over 1,000 square feet of retail space and
1,000 square feet of office and storage space in the basement
Second most profitable store in the fourteen store region
Located one block away from Commuter Rail train station and in busy retail shopping area
Only one direct competitor (Au Bon Pain) in the area
The Frappuccinos
Site’s Operational Results (1998 FYTD – 11 Months)
Financial Operations 1998 1997 %
Total Sales $760,576 $796,688 (4.5%) COGS 242,593 262, 945 (7.7%)C/M 517,983 533,743 (3.0%)Fixed Exp. 367,746 431,923 (14.9%) EBIT $150,237 $101,820 47.6%
– No money spent on independent advertisement
– Local entertainment budget underutilized
The Frappuccinos
Volume of Sales vs. Contribution Margin %
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
EspressoDrinks
WholeBeans
Drip Coffee Pastries BlendedBeverages
OtherBeverages
Serveware PackagedFood/Tea
Media BrewingEquipment
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Dollar Volume Sold Product Contribution Margin %
The Frappuccinos
Site 7-S Analysis
The Frappuccinos
Site 7-S Analysis
Strategy– Store’s strategy is to create a comfortable Third
Place environment
– Serve customer a customized high-quality product
– Achieve high level of profitability by focusing on high-margin items while generating add-on sales
– Minimize overall expenses by focusing on controllable expenses
The Frappuccinos
Site 7-S Analysis
– Corporate organization is tall with four levels of management above store management
B aris tas B aris tas B aris tas
S h ift S u p erviso rs
A ss is tan t M an ag er
S to re M an ag er Structure
– Functional in structure and relatively flat
The Frappuccinos
Site 7-S Analysis
Staffing– Location has one manager, an assistant manager and
16 partners
– Benefits package includes health, dental, and vision care, stock options, free shift drinks, and a free pound of coffee each week
– Raises are based on semi-annual performance evaluations with raises ranging from 0-5%
– Bonuses are not utilized, but the location has given away non monetary rewards
The Frappuccinos
Site 7-S Analysis
Systems– Corporate headquarters exercises controls over
individual sites– Total Quality Management is specifically built into
their processes– Utilizes a large amount of information
technology (IT)– Internal controls for the store are determined by
the manager based in part on information provided by the IT system
The Frappuccinos
The use of IT at Starbucks
Corporate ITSystem
IndividualStores
IndividualStores
Sales,Inventory,
Staffing
Sales,Inventory,
StaffingIndividual
Stores
Inventory,Orders,
Transfers
Vendors,Distributors,
Mgmt.,ChannelMembers
Orders, Budgets,Future Sales
The Frappuccinos
Site 7-S Analysis
Skills– Most important skills include “people skills” and
drink preparation ability– Partners receive training to learn about products,
brewing methods, and sales techniques– Retraining mainly occurs during new product roll-
outs, although this site does not use regular meetings, but instead one-to-one discourse
The Frappuccinos
Order Cycle Times
Take Customer’s
Order
BottleneckOrder?
Pastry?
.53 Min
.53 Min
Yes
Yes
No
Pastry?
.40 Min
.27 Min
Yes
No
No
Bottleneck Capacity 114 / Hr
The Frappuccinos
Site 7-S Analysis
Style– Basic management style is Laissez Faire– Management motivates through reviews and
raises– Work duties are assigned by shift supervisors– Employees are allowed to use initiative and
empowered to make decisions
The Frappuccinos
Site 7-S Analysis
Shared Values (from Mission Statement)– Provide a great work environment – Treat each other with respect and dignity– Embrace diversity– Apply the highest quality standards for products– Develop enthusiastically satisfied customers– Contribute to the community and environment– Recognize that profitability is essential to future
success
The Frappuccinos
Alignment of Store with Corporate Strategy
Contrary to the mission statement focus, the reduction of staffing levels appears to be more important than developing satisfied customers
The relevance of the benefits package is misaligned considering the average age of employees
The high turnover rate of partners and managers is detrimental to customer environment
The Frappuccinos
Recommendations
The Frappuccinos
Recommendations For Improvement
1. Revamp the employee reward system
2. Tighten focus on creating the “Third Place” environment
3. Focus profitability measures on profitable sales, not just reduction in staffing
The Frappuccinos
Revamp Employee Reward System
Large percentage of the staff are under the age of twenty
Benefits package focuses on medical, dental, and vision care, as well as the employee stock options
Outside of hourly wage, and semiannual raises, there are few monetary rewards
The Frappuccinos
Improve “Third Place” Environment
Site has a very high employee turnover rate Manager “promoted” to a another store in
hopes of improving their poor performance Site has very poor handicapped accessibility Condition of restroom in each of our visits
was poor and had no baby changing area
The Frappuccinos
Focus Profitability Measures on More Than Just Staffing
Store is underperforming on some high margin product segments
Too high a focus on minimizing direct labor as a key to achieve profitability
Focus on high-margin items and profitable add-on sales
By increasing pastry sales by 33%, store would realize a $16K increase in contribution
The Frappuccinos
Focused Recommendation
Improve “Third Place” Environment
The Frappuccinos
Pros and Cons of Discounted Opportunities
Revamp the Employee Reward System
Pros– Employees are motivated
with more incentive to perform
– Lower employee turnover rates
– Positive reinforcement which leads to higher feelings of job satisfaction
Cons– Pay and benefit structures
dictated by corporate HQ
– Cost of benefits would additional benefits lower site profitability
– New reward system requires additional management
The Frappuccinos
Pros and Cons of Discounted Opportunities (Cont.)
Focus Profitability Measures on More Than Just Staffing
Pros– Higher staffing levels
benefit other employees
– Better customer service
– Improved customer focus could lead to higher sales
Cons– Staffing is a cost that will
decrease profitability
– Upper-level management perception of low employee productivity
– Employees may get in each other’s way
The Frappuccinos
Three-Step Action Plan For Improvement
Decrease employee turnover rate– Focus on hiring older employees where benefits
package is more appropriate– Base raises on performance rather than
maximizing raises for economic reasons– Develop and actively maintain a reward system
for employees (i.e. employee of the month)– Develop a system of regular employee
communications / meetings
The Frappuccinos
Action Plan (cont.)
Improve site accessibility and cleanliness– Upgrade front door and restrooms for
handicapped accessibility – Add a baby changing station– Redesign restroom to separate cleaning supplies
from bathroom or move cleaning supplies to another location
– Focus employee attention on restroom cleanliness
The Frappuccinos
Action Plan (cont.)
Enhance Starbuck’s differentiated atmosphere– Utilize entertainment budget to hire outside
entertainers, have book / poetry readings, etc.– Display the store’s collection of games and
activities more prominently– Make the location more of a “scene”
The Frappuccinos
Impact Analysis - Benefits
By focusing on the initial recruitment and hiring stage, and by rewarding employees based on merit current turnover rates will be reduced.
By focusing on site accessibility and cleanliness, the physical facility will not detract from atmosphere.
By improving Starbucks’ atmosphere, it will become a more attractive place to go.
The Frappuccinos
Potential Risks
Customers may not react positively to the changes being made
Not enough available employees to meet re-aligned hiring needs
Claims of age discrimination and negative affect on sales in youth demographic
Costs associated with planned change
The Frappuccinos
Wrap-Up
Starbucks is the market leader in a growing market segment
Starbucks is known world-wide for its high-quality food products and differentiated “Third Place” atmosphere
The Wellesley location embodies the ideals of the corporate mission and has been very profitable, but there are still opportunities for improvement
The Frappuccinos
Conclusion / Questions
top related