Download - case study on starbucks
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.