starbucks expansion

Expansion to Italy, Serbia & Montenegro

Presentation by: Kristian, Maja, Arya & Murat

1

Starbucks

2Presentation by: Kristian, Maja, Arya & Murat


Starbucks was established in 1971 in Seattle, WA. Starbucks is a premier roaster, marketer and retailer of specialty coffee

around the globe. Starbucks operates more than 21000 stores in over 65 countries and

employ 182,000 employees. The company has four operating segments: Americas, Europe, Middle

East & Africa(EMEA) & China/Asia Pacific. In 2014, Starbucks’ revenue amounted to approximately 16.45 billion

US dollars, up by 10.4% from 14.9 billion dollars the previous year.

Company Profile


4

Products Offered CoffeeHandcrafted Beverages FoodMerchandise

Consumer Products Coffee and TeaReady- to- Drink (RTD)


5

Market Saturation

6

A Global Company


7

Starbucks Stores by Country



8

STRENGTHS WEAKNESSES• Global Presence• Strong Financial Position • Building Strong customer connect

through value added services

• Tax Evasion and law suits • Product recalls

OPPORTUNITIES THREATS• Growing presence in foreign

markets• Product Innovation and new growth

platforms• Expansion of retail operations

• Increased competition from local cafes and specialization of other coffeehouse chains

• Slowing US sales


9

Risk Analysis

Cultural Challenges High competition with local established coffee shopsPolitical/Legal risksMakes Less money overseas


Perception of Coffee in Italy, Serbia & Montenegro

Consumers in Serbia and Montenegro enjoy leisure away from home and work in ‘’third” places such as restaurants and bars.

For Italians, drinking their coffee is as routine as breathing. Pleasure and leisure play an important role in consumer culture of

drinking coffee. People in Serbia, Montenegro and Italy have big passion for coffee. The coffee should be what people remember


11

Serbia: Coffee Culture Motives that dominates during the purchase is

quality of coffee (65%), brand (22%) and price of coffee (8%).

Brand is considered as a guarantor of good quality. Coffee is seen as a segment of power, respect and

self-attestation.

[Montenegro: Coffee Culture]

12

Drink a lot of coffee and like their coffee plain.

Most favorite coffee is called Deutsch coffee – same as macchiato.

Drink coffee in restaurants and bars for hours-no to go orders.

Coffee plays important role


Italy: Coffee Culture

Foreigners

Caffé Hag Caffé Americano Caffé Lungo

13

Italians

Expresso Cappuccino Caffé Macchiato Latte Macchiato Caffé Coretto


[Italy: Coffee Culture]

14

70 million cups of espresso are consumed in Italy each year.

600 shot’s per person in 110,000 coffee bars.

Milan has 600 cafes alone. Italian cafes source of pride and joy. Cafes concentrate more on their image

rather than coffee.


Starbucks in Serbia,

Montenegro, and Italy

Very well known by its brand and popular in EuropeExotic for just being foreignUnique and sophisticatedCustomization and variety of coffee


15

Starbucks Serbia


Input Data

Store opening $325,000 First year sales (in units) 81,000 Tax rate 15.00%Sales price per unit $5.00 WACC 7.92%Variable cost per unit $2.25 Inflation 6.86%Nonvariable costs $141,750

Projected Net Cash Flows (Time line of Annual Cash Flows)Years 0 1 2 3 4

Initial Investment:Starbucks Italy ($325,000)

Project's Cash FlowUnits sold 81,000 93,150 107,123 123,191Sales price $5.00 $5.34 $5.71 $6.10 Variable costs $2.25 $2.40 $2.57 $2.75

Sales revenue $405,000 $497,700 $611,619 $751,613 Variable costs 182,250 223,965 275,229 338,226Nonvariable operating costs 141,750 151,474 161,865 172,969Oper. income before taxes (EBIT) $81,000 $122,261 $174,525 $240,418 Taxes on operating income (15%) 12,150 18,339 26,179 36,063After-tax operating income $68,850 $103,922 $148,347 $204,355

Net cash Flow ($325,000) $68,850 $103,922 $148,347 $204,355

Appraisal of the Proposed Project

Net Present Value (at 7.92%) $96,703.14IRR 18.49%MIRR 15.18%

Profitability index 1.19

Starbucks Serbia: Break-even Analysis


Starbucks Italy

18

Input Data





Sales revenue $756,000 $884,354 $1,034,499 $1,210,137 Variable costs 340,200 397,959 465,525 544,561Nonvariable operating costs 264,600 269,151 273,781 278,490Oper. income before taxes (EBIT) $151,200 $217,243 $295,194 $387,086 Taxes on operating income (31.4%) 47,477 68,214 92,691 121,545After-tax operating income $103,723 $149,029 $202,503 $265,541

Net cash Flow ($500,000) $103,723 $149,029 $202,503 $265,541





Starbucks Italy: Break-even Analysis


Starbucks Montenegro

20

Input Data





Sales revenue $486,000 $569,854 $668,177 $783,464 Variable costs 218,700 256,434 300,680 352,559Nonvariable operating costs 170,100 173,434 176,833 180,299Oper. income before taxes (EBIT) $97,200 $139,986 $190,664 $250,606 Taxes on operating income (9%) 8,748 12,599 17,160 22,555After-tax operating income $88,452 $127,387 $173,504 $228,052

Net cash Flow ($350,000) $88,452 $127,387 $173,504 $228,052





Starbucks Montenegro: Break-even Analysis


Sales Comparison

22

$0.00

$200,000.00

$400,000.00

$600,000.00

$800,000.00

$1,000,000.00

$1,200,000.00

$1,400,000.00

SalesCountry Year 1 Year 2 Year 3 Year 4 TOTAL

Italy $756,000.00 $884,353.00$1,034,499.0

0$1,210,137.0

0$3,884,989.0

0

Serbia $405,000.00 $497,700.00 $611,619.00 $751,613.00$2,265,932.0

0

Montenegro $486,000.00 $569,854.00 $668,177.00 $783,464.00$2,507,495.0

0

TOTAL $1,647,000.00

$1,951,907.00

$2,314,295.00

$2,745,214.00

$8,658,416.00


Cash Flow Comparison


$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

Cash FlowCountry Year 1 Year 2 Year 3 Year 4 YEAR

Italy $103,723.00 $149,029.00 $202,503.00 $265,541.00 $720,796.00

Serbia $68,850.00 $103,922.00 $148,347.00 $204,355.00 $525,474.00

Montenegro $88,452.00 $127,387.00 $173,504.00 $228,052.00 $617,395.00

TOTAL $261,025.00 $380,338.00 $524,354.00 $697,948.00$1,863,665.0

0

Benefits vs. Risks A way of testing the market Increasing the intrinsic value

24

Conclusion


25

Questions


starbucks expansion

Business

drink coffee

coffee bars

quality of coffee

lot of coffee

deutsch coffee

favorite coffee

price of coffee

arya murat starbucks