CASE STUDY

STARBUCKS CORPORATION

Group members

Darpan GoswamiDurlov Protim BoruaTanvi HussainPranami BorahDimpal Bharali

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

Overview

1971 – Starbucks opened in Seattle’s Pike Place Market.

1982 – Howard Schultz joined Starbucks .1983 – Schultz travelled to Italy

1985– Howard Schultz established Il Giornale Coffee bar.

1987 – Il Giornale acquired Starbucks and changed the name into Starbucks Corporation.

1992 – Starbucks went public at $17 a share

1996 – Starbucks Coffee International opens its first non-North American store in Japan at Tokyo

Timeline

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 downProduct pricing(expensive)SizePromotion strategySelf cannibalization

Opportunities

Emerging International marketsGood relations with suppliers and

partnersSatisfied customersHigh visibility locationsLocal themed food items Alliance and acquisitionsExclusive purveyor of Narino Supremo

Threats

US market saturationAntiglobalizationFierce competitionMediaCultural 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

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.

Threat of substitution

Competitive rivalry

Other coffee chains. examples include Café 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

PepsiCoDreyer’s 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