Introduction to Starbucks

• 1971 - Starbucks Coffee opens is first store in the Pike Place Market in Seattle, Washington.

• 1984 - Howard Schultz convinces the original founders of Starbucks to test the coffee bar concept.

• 1988 - Starbucks comes out with their first mail-order catalog, enabling mail-ordering of their coffee in all 50 states.

• Grew from 55 stores in 1989 to over 15,000 stores today

• Products sold include:• - beverages - pastries• - whole coffee beans - coffee-related retail items

Interior & Exterior of starbucks

Introduction to Starbucks

Starbucks Corporation is an American global coffee company and coffeehouse chain based in Seattle, Washington.

Headquarters: Seattle, WA, United States of America

Founded: 1971, Pike Place Market, Seattle, Washington, United States

CEO: Howard Schultz

Founders: Gordon Bowker, Jerry Baldwin, Zev Siegl

Mission Statement

“Our mission is to inspire and nurture the human spirit – one person, one cup, and one

neighborhood at a time.”

• Provide a great work environment and treat each other with respect and dignity.

• Embrace diversity as an essential component in the way we do business.

• Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee.

• Develop enthusiastically satisfied customers all of the time.

• Contribute positively to our communities and our environment.

• Recognize that profitability is essential to our future success.

Guiding Principles of starbucks

Coffee: Some Facts

First consumed in East Africa during the 11th century.

Quality of beans – Robusta & Arabica. Produced in 70 countries. Global coffee production – 134.2 mn

bags. More than $70 bn retail sales

globally.

Industry Definition

Specialty Eatery Industry

Food and beverages

Steady growth in the 90s leading to increased competition

Demand for specialty food services has increased in recent years

85%

11% 2% 1%

Percentage Share of different countries in Number of Starbucks Stores

UNITED STATES ASIA-PACIFIC EUROPE-AFRICA NORTH-SOUTH AMERICA

2000 2001 2002 2003 2004 2005 2006 2007 20080.00

2000.00

4000.00

6000.00

8000.00

10000.00

12000.00

Yearly Sales Data of Starbucks

Years

19871988

19891990

19911992

19931994

19951996

19971998

19992000

20012002

0

1000

2000

3000

4000

5000

6000

7000

8000

NO OF STARBUCKS STORES OVER THE YEARS

Years

Process Differentiation(the value chain)

Financing, Legal Support, Accounting

Recruiting, Training, Incentives, Feedback

Equipments, Production, Packaging, Selling

Getting the coffee : Where & How

Inbound Logistics

Billing and collection

Delivering the

product

Promotions and

Advertising

Customer satisfaction

and feedback

Firm Infrastructure

Human Resources

Technology & Development

Procurement

Primary activities

Industry and Competitive Analysis

Market StructureMonopolistic Competition

Competitive ActivityMany companies are in the market and competition is fierceCompetitors use location, product mix, and store atmosphere differentiation to establish market niche

Industry Costs and Capital StructureLow to moderate costs for each locationMajor start-up expenditures are property and equipmentMajor operating costs are labor and cost of sales

International Competitors

Dunkin DonutsSells coffee beans both online & at physical outletsFresh brew coffeeSimilar services & products as Starbucks

Mc Donald’sOffers number of specialty coffeesHuge penetrationEstablished fast-food retailer

VALUABLE RESOURCES:Creating Competitive Edge

• Physical Resources– Large number of outlets (Hub & Spoke Model)– Operations in 40 countries with 9000 cafes– Hi-tech coffee machines & equipments

• Intangible Resources– Techniques to roast & brew coffee– Large satisfied customer base– Building employee relationship– Reputation for having the finest products and services in the world

• High quality of products• Quality of Workforce• Strategic Store Location• Tangible Resources

• Coffee beans (Ex. They have sole ownership of the Narino Supremo beans, which is considered to be one of the highest quality coffee beans in the world.)

• Intangible Resources• Perception/Reputation of quality (beans, company name, etc)• Largest and best known of coffee house chains

Corporate Culture:

Company Values• No compromise on Quality

• No Franchising

• Not selling artificially flavored coffee beans

• Employee freedom of expression

• Customer is of Prime Importance• “Just Say Yes” to customer requests• Modify Products as per customer’s preferences• Satisfy customer at all costs

» Eg: Providing a free-drink coupon if the customer is not satisfied

Industry PEST Analysis

Political InfluencesState & Local government controls

Economic InfluencesChanges in disposable income could influence purchase levels

Social InfluencesConsumer preferences could shift from coffee to other beverages

Technological InfluencesUse of technology can improve operational efficiencies

SWOT Analysis

Strengths

ever experienced a strike or work stoppage

Good relationships with coffee suppliers

Value employees

Located in high traffic areas

Employee turnover rate is 60%, compared to 140% in the fast food business

They don’t move into new markets until they dominate the ones they expand into

SWOT Analysis

Weaknesses

Excessive focus

Employees report to two division heads

Increasing shareholders dilutes their interest

They have expanded too quickly, and have already saturated the US market

They do not allow smoking in their stores, alienating some of their customers

SWOT Analysis

Opportunities

Expansion into European and Latin American markets

Distribution agreements, such as hotels, airlines, and office coffee suppliers

Reducing alcohol consumption in the US leads to bars being used less which leads to people needing another place to go

Use supermarkets as a way of expanding into international markets

Numerous brand extension

Improve on perception of instant and decaffeinated coffee to expand that market share

SWOT Analysis

Threats

The coffee market is saturated

Cost of coffee beans is expected to rise in the near future

Supermarkets threaten whole bean sales

Farmers might switch from coffee to vegetable crops

High competition from Japanese competitors

Consumers trend toward more healthful fare

Customer Willingness to Pay

Why go to Starbucks?

A place to think and ImagineA place to gather and talk

A Third Place beyond Work and Home

Leather Chairs Newspapers Couches The Authentic Coffee Experience: the

artistry of espresso making Fast Service and Quiet Moments

Stores Designed on 4 stages of coffee making: growing, roasting, brewing and

aromaMails, Music, Work

Conclusion

Starbucks has been increasing its debt every year, and at a pace that is faster than their assets are growing (which is clearly unhealthy).

This is why we chose for the firm to slow down its expansion and to focus more on marketing their products.

In such a saturated market as the one that they are in Starbucks needs to focus on increasing consumer awareness and to decrease debt as much as possible.

In closing we believe that Starbucks can become even more profitable if they slow down their expansion and concentrate on the stores that they already have open.