By: Cody Sulkowski, Dana helm, Angelic DelaCruz, Sarah Crampton, Kristen, Gina

Executive Summary Our plan is straightforward, to keep 250 Starbucks locations in

Southern California open until 1am, 7 days a week beginning January 1, 2013. Our plan includes a specific promotion and is attainable with the available resources. We intelligibly offer a way to increase daily profit by shifting the behavior of our consumers, which in turn will grow the organization. Our suggested marketing budget is $822,576 and will contribute an additional 13% to the company’s sales revenue. Through situation analysis, marketing objectives, strategy and programs and financial analysis, we discuss why this objective is specific, measureable, achievable and realistic in the time allotted. Funding our plan will not only increase profitability, but it will also create customers for life.

Situational Analysis

• Starbuck’s team continues to grow every year, last year we ended our fiscal year with more than 17,000 stores in 55 countries. What our Starbuck’s team is going to focus on more domestically is the stores that are currently in place all over the United States. Approximately, 1,700 stores in the United States are going to be remodeled this year. Our new flagship store in Times Square is an example of what our stores will look like.

Situational Analysis Continued 

Focusing on the southern part of California, Starbuck’s locations will be experiencing growth by selling beer and wine in their stores after two p.m. They introduced beer and wine into the Pacific Northwest stores and had great success. Starbuck’s plans to introduce these products into four to six southern locations and two of them will start to sell beer and wine in Orange County. They stated, “The four beer and wine cafes will also undergo remodels to add flexible seating to accommodate a variety of groups, especially large parties like book clubs. Wine prices have not been set for the cafes. In Pacific North West locations, prices range from $7 to $9 for a glass of wine and $5 for a bottle of beer. The food menu will consist of savory snacks, cheese plates and hot flat breads to drive sales at night”(Starbucks). This will help drive sales into the stores that we are planning on keeping 250 locations open till one a.m.

Core Competencies

Distribution • Starbucks distributes through two retail channels. The first is retail stores

where customers enjoy quality coffee service, an inviting atmosphere and an exceptions cup of coffee (“Starbucks Company Profile”). The second, is online at the “Starbucks’ Store” where customers may purchase coffee beans, tea bags, brewing equipment, drink ware, gifts and Starbucks cards (“Starbucks Store”).

Manufacturing• Manufacturing capabilities include 1 company owned manufacturing facility

(Georgia, USA) (Hutson), 5 company owned coffee roasting plants (Nevada, Pennsylvania, South Carolina, Washington, USA and the Netherlands), 24 co-manufacturers (United States, Canada, Europe, Asia and Latin America), 1 tea processing plant (Portland, Oregon, USA), 70,000 – 80,000 deliveries per week and 2.7 million deliveries per year (Cooke).

• Starbucks marketing structure is monopolistic competition due to many competitors offering a differentiated product type with low barriers to enter or exit the market. Starbucks offers a place to stay, work and listen to music. This allows for some pricing strategy, since Starbucks demands a higher price for is coffee (Jochem). Starbucks participates in two key customer markets: consumer markets and global markets. Starbucks sells mass consumer goods and services such as coffee, tea and baked goods, spending a great deal of time establishing communications and reliable service.

• Starbucks in the global marketplace carefully decide on which countries to enter, how to enter each, how to adapt product and service features for each country, how to price products in different countries and how to design communications for different cultures. Starbucks faces different requirements for buying and disposing of property; cultural, language, legal and political differences; and current fluctuations (Kotler 9).

S.W.O.T Analysis

Market TrendsMarket trends

Compared to the rest of the market, during the past year Starbucks’ stock has steadily declined in value. Meanwhile, Peet’s Coffee, one of Starbucks’ major competitors, has had its stocks perform about the same as the rest of the market, following the general trend of rises and drops that the market experienced (Higbee).

Category marketing activity As of late, Starbucks has clearly been declining compared to its main competitors and compared to the market. One cause of this may be the current economic downturn. The slowdown in the economy has changed people’s spending habits. According to the Associated Press, “Research by WSL Strategic Retail found that ...premium brands or food and specialty coffees...are [among] the top areas where people are trimming their spending” (Higbee).

Current cost, price and sales data of product

Environmental factors • The proper management of our natural resources is key to promoting the

health and vitality of the Southern California region. As fossil fuels become more costly, we will likely see an even greater proliferation of hybrid and electric vehicles that emit less pollution. As the cost of solar panels comes down, their use, too, will increase. While the quality of our drinking water is generally good, future generations will be astonished by our profligate use of drinking water for irrigation. Many parts of Southern California, particularly Los Angeles, have substantial amounts of unused or underutilized land. These vacant lots, many of which are owned by the city, often end up being the repository of household debris and community nuisances. Action programs seeking to turn vacant lots into pocket parks, community gardens, and other community amenities are being put in place under funding from foundations such as the California Endowment and under national initiatives, including the Centers for Disease Control and Prevention's RENEW program (Jackson).

Porter’s five forces

1. Lower‐end or “less luxurious” coffee places2. Places that offer people a place to hang out, chat, relax or even work.

Examples include tea houses, fast food places, ice‐cream parlors, side‐walk cafes, and bars and pubs

3. The entry barrier for the coffee industry is relatively low, even for premium coffee like Starbucks.

4. There is more bargaining power for suppliers of technological innovations such as automated coffee machines, latte and espresso machines, etc because there are not as many suppliers for such equipment

5. With newer entrants and competitors such as McDonalds who claim to offer premium roast coffee of reasonable quality for lower price, buyers now have slightly more bargaining power than they’ve had in the past (Higbee).

Substitutes (Products)1. Other beverages apart from Starbucks coffee and tea –

Examples include soda, fruit juice, smoothies, water, beer and other alcoholic drinks

• Other “quick‐grab” foods apart from pastries, muffins, doughnuts, etc sold at Starbucks. Examples include burgers, burritos, tacos, sushi, snack food

Sales AnalysisCompany Market Cap RevenueStarbucks 40.09 B 12.19 B McDonalds 99.47 B 27.01 BiHop 1.02 B 981.63 MDenny’s 472.5 M 518.3 M

Sales Continued• Total net revenues increased 13% to $3.3 billion• U.S. comparable store sales increased 7%; Global comparable store sales

increased 6%• Channel Development revenues increased 45% to $316 million• Operating income increased 22% to $492 million; operating margin expanded

120 basis points to 14.9%• EPS increased 19% to $0.43 per share, compared to $0.36 per share in Q3 FY11• Starbucks opened 231 net new stores globally, including its 600th store in

mainland China, and its first stores in Finland and Costa Rica.• (“Starbucks Reports Record Third Quarter Results”)

Costs• Coffee prices are at $1.9 a pound, significantly lower than last year’s prices of

$3 per pound. • Since Starbucks “hedges its coffee costs by entering into long-term coffee

contracts”, the lower input costs will lead to margin improvements (“Trefis”).Profit Trends• Starbucks plans to accelerate growth by opening approximately 1,200 net new

stores globally, representing 20% growth  over fiscal 2012.• The company is targeting approximately 10% - 13% revenue growth, driven by

mid-single-digit comparable store sales growth, approximately 1,200 net new store openings, and continued strong growth in the Channel Development business.

• (“Starbucks Reports Record Third Quarter Results”)

Competitors

Competitors Continued• McDonald's has become the world's largest fast-food company with 22% market share and

more than 33,500 restaurants serving burgers and fries in 119 countries. Approximately 500 restaurants are located in Southern California and about 60% of them are open 24 hours, including the drive-through. It is well known for its Big Macs, Quarter Pounders, and Chicken McNuggets. Most of the restaurants are freestanding units providing dine-in and drive-through service, but McDonald's also has many eateries located in airports, retail areas, and other high-traffic locations. McDonald's has established its brand imagine as convenient and wholesome family dining. The company mainly targets families with children, advertising its kid-friendly Kid’s Meals and budget-minded Value Menu. In order to attract more consumers, McDonald's is also continuously creating new menu items (“McDonald's Corporation”). Recently, the company has been promoting a new line of espresso coffee drinks such as Premium Roast Coffee, McCafé Caramel Mocha, McCafé Caramel Mocha and more under the McCafé line (“McCafe”).

Competitors Continued• Denny's Corporation

With more than 1,650 of its signature eateries located across the country, Denny's is one of the top full-service, family-style restaurant chains in the United States. It is open 24 hours a day and is best known for its breakfast menu items, including eggs, pancakes, and combination plates such as the All-American Slam, Lumberjack Slam and the Grand Slam Breakfast. Denny's also provides standard American meals like burgers, sandwiches and steaks for lunch and dinner. The company owns and operates about 230 of its restaurants, while the rest are franchised or operated under licensing agreements. 416 of the restaurants are located in state of California (“Denny's Location”).Denny’s has established itself as a family friendly dining environment and features good quality and value food choices. In order to help the operation run smoothly, Denny’s offers discounted prices during limited times on their menu for their consumers. In 2010, Denny’s came out with $2 and $8 value meals and in 2011started serving "Baconalia" menu featuring different bacon-centered dishes 24 hours a day, 7 days a week.

Competitors Continued• International House of Pancakes (IHOP), LLC is owned by DineEquity

Inc., with a market share of 3% in the breakfast and dining restaurant market (International House of Pancakes LLC). IHOP restaurants provide moderately priced, good quality food and beverages as well as table service in a comfortable and family-friendly atmosphere. IHOP restaurants are best known for their signature pancakes, omelets and other breakfast specialties. In addition IHOP restaurants are open throughout the day and evening hours and offer different choices of meals for lunch, dinner and snacks. It has about 1,500 franchised restaurants that are open 24 hours a day in selected locations and over 200 locations in Southern California. IHOP also serves discounted value pricing and limited-time offers (such as its Free Pancake Giveaway) similar to Denny’s (“DineEquity, Inc.”).  

Customer Analysis

The Starbuck’s AppealA Place for Everyone• Apart from coffee, Starbucks also carries a selection of food items and

coffee-free beverages, making it friendlier for children and snack-seekers.

• Customers have the option to over-indulge via a trenta-sized (their largest size to date, being 31oz.) macchiato and a pastry, or under-indulge with options like a skinny latte (about 120cals. according to their menu) and lighter snack options such as their veggie snack box.

Ambience• The allure of Starbucks extends to more than just their coffee, with

prices that are not necessarily competitive (from about $2 for a small cup of coffee to even $20 for an elaborate, customized drink).

• Because Starbucks’ interiors in Los Angeles will not be far from that of a location in Tokyo, customers know what to expect when they walk into those heavy glass doors. With a rich, warm color scheme, alternative music, coffee aroma, casual couches, and organic=looking art, every Starbucks’ location’s overall aesthetic and ambience evokes the romance of coffee.

Consistency• The key to Starbucks maintaining customer loyalty over the years is in

the reliability of the Starbucks experience. Even with complaints about Starbucks’ high prices, it can be argued that one can pay a small fee of $2.50 for a cup of coffee, free Wi-Fi, and a warm, public environment where he/she can sit, work, and mingle. As numbers have shown over the years, certainty is quite attractive.

Marketing Objectives• Specific –Starbucks will keep a select number of stores in

Southern California open until 1am, 7 days a week. Southern California includes Los Angeles County, Orange County, Riverside, San Bernardino, San Diego Metropolitan Area, Bakersfield Metropolitan Area, and Oxnard-Thousand Oaks- Ventura Metropolitan Area.

• Measurable – Out of the 1,700 Starbucks locations in Southern California, 250 Starbucks locations will change their operating hours to remain open until 1am.

• Achievable – This objective is achievable. The select locations were chosen based upon their positioning near college campuses, nightclubs, bars and event centers.

• Realistic – This objective is realistic with our current available resources and involves no additional resources.

• Time – The specific and realistic timeline for this achievement will begin on January 1, 2013. The 250 Starbucks locations in Southern California will remain open until 1am, 7 days a week.

1 , 7 0 0 S t a r b u c k s L o c a t i o n s I n S o u t h e r n

C a l i f o r n i a( G o o g l e M a p s )

Strategy and ProgramsPricing – All pricing with remain the same. A $1 off discount will be given to any purchase made between the hours of 11pm – 1am, 7 days a week.

Advertising Our Market Areas of Interest:

Los Angeles:Downtown - Staples Center and LA LiveHollywood - Hollywood Walk of Fame, Chinese Theater,El Capitan Theater, Hollywood and VineSunset StripBeverly Hills - Rodeo Drive, Restaurant RowSanta Monica’s Third Street Promenade and PierLA/OC Amusement Parks and BeachesOrange County: Disneyland, Newport Beach, Laguna Beach, South Coast Plaza, Irvine Spectrum, and Fashion Island

San Diego:Downtown, Gaslamp District, Convention Center, Qualcomm Stadium, Petco Field, Old Town,

Hillcrest, La Jolla, Del Mar, Carlsbad, Oceanside, Balboa Park, Torrey Pines, Pacific Beach, Military Bases, Casinos, and Amusement Parks.

Bulletin BillboardsDelivers high frequency and is positioned on highly visible, heavy traffic locations

such as highways expressways, primary arteries and major intersections.Builds strong brand and image awareness.Delivers high reach and frequency over an extended period of time. Long term, permanent displays offer a dominant presence in the immediate trade

area.

• Promotion – Our promotion of a $1 off discount is targeted directly our customers.• Distribution – The distribution will employ the channels of the select 250 Southern

California Starbucks locations.• Sales Force – Will include additional hires and store mangers see fit. Re-

organization of store management to allocate a night-shift manager. • Product – We are not adding, changing or deleting any products. • Service and Support Needed – Service and support needed to keep locations

operating during new hours. • Use of Market Research – Starbucks’ marketing team conducted market research

to determine the best Starbucks locations that would increase profitability most by staying open until 1am, 7 days a week. This research evaluated the geographical area and foot traffic of the 1,700 Starbucks locations in Southern California. Additional research was done to determine what advertising methods would have the best reach and frequency of viewing based on location.

• Affordability of Proposed Programs – We are requesting $822,576 to be allocated for our marketing budget. A specific breakdown of our total marketing cost includes:

Financial Analysis

Financial Analysis Continued

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