Starbucks initial achievement was fostered out of their proficiency to shatter away from

the accepted wisdom that coffee could not be traded at a vertical premium. By redefining
the achievement components in the specialty coffee retail commerce Starbucks was adept
to prosper. If they desire to know-how the identical achievement in the future the
industry's achievement components should one time afresh be addressed and questioned.
For demonstration, will customers extend to pay a vertical premium for specialty coffee
in alignment to relish the ambience of a shop or the

exceptional clientele service it offers- Have McDonald's and Dunkin' Donuts entry into
the specialty coffee commerce redefined the achievement components by proposing high
value coffee at considerably decreased prices- These inquiries lead an association for
example Starbucks into the more significant investigation of their functional setup,
schemes, and organization. During an commerce transition out of the development stage
and into the mature stage, it becomes exceedingly significant for Starbucks to realise
what alterations they should make to their functional setup, schemes and association in
alignment to acclimatize successfully. This retains so much significance because attaining
achievement in a mature commerce is reliant on accomplishing operational effectiveness
while sustaining the proficiency to innovate and be responsive to customers. A mature
commerce suggests steadiness inside the commerce natural environment, slow
technological advancement, a larger focus on cost effectiveness and a need to stay
innovative. The inquiry, then, is how an association for example Starbucks can set up a
more effective hierarchy without limiting their proficiency to innovate
Thus, their structure, schemes, and bureaucratic set up should focus more flexibility with
higher grades of autonomy and nonhierarchical coordination. This expanded flexibility
can be accomplished by eradicating as numerous places inside the hierarchy as possible;
boosting larger connection amidst the diverse enterprise units; and decentralizing the
decision-making process. To boost effectiveness, Starbucks should apply inducements
founded on accomplishment of particular goals in the

form of economic pays for promotion. Penalties should furthermore be directed to those
enterprise flats who go incorrect to rendezvous agreeable standards.
Pay and benefits:
Increased salaries of the most of hourly shop partners in the U.S. and Canada at the starting of
fiscal 2007, as a outcome of our partners repsonse and comparable market studies.
Implemented market changes for most of our salaried shop partners in the U.S. and Canada.
Made the conclusion to elaborate our administration inducement program to encompass about
1,200 added partners in the U.S. and Canada who will be suitable for the bonus/incentive in
fiscal 2008.
Completed an worldwide Total Pay evaluation to reconsider Starbucks reimbursement and
advantages in worldwide markets where we do business.
Provided larger colleague get access to to online Total Pay data, encompassing the redesign of
Starbucks Total Pay website.
Streamlining connection between and inside groups:
Consolidated colleague publications into one company-wide publication, Sirens Tale, and took
it online to make it simpler for partners to get access to, while extending to supply all of the
data before accessible to partners.

Redesigned and upgraded the shop portal, which is the intranet for partners in shops in the U.S.
and Canada.
Consolidated diverse connections to partner-specific websites accessible on Starbucks.com.
Creating future job opportunities:
Enhanced the Partner Career website, giving partners better networking and vocation designing
devices and lifting their visibility to recruiters and chartering managers.

Starbucks Corp: Key Ratios

Growth Rates
Price Ratios
Profit Margins
Financial Condition
Financial
data in
U.S. dollars
Investment
Returns
Management
Industry:Efficiency
Special Eateries
Ten Year Summary
Starbucks Corp: Company Report

advertisement

Financials

2401 Utah Avenue South

Seattle WA 98134

Last 12 5 Year

http://www.starbucks.com/

Months Growth
Sales

Phone: 206-4471575

Income
Dividen

Industry : Special Eateries

Employees : 142,000
Exchange : NASDAQ

d Rate
Dividen
d Yield

9.9 Bil

13.1%

568.0

0.1%

Mil
0.00

NA

0.00%

0.00%

More financials
Fundamental Data
Debt/Equity Ratio

0.16

Gross Margin

22.50%

Net Profit Margin

5.77%

beverages, cold blended beverages, a range of food items, a selection of

Total Shares

743.4

premium teas, and beverage-related accessories and equipment, through

Outstanding

Mil

Starbucks Corporation, together with its subsidiaries (Starbucks) is the roaster

and retailer of specialty coffee. It purchases and roasts whole bean coffees and
sells them, along with fresh, rich-brewed coffees, Italian-style espresso

Company-operated retail stores. Starbucks also sells coffee and tea products
and licenses its trademark through other channels such as licensed retail stores
and, through certain of its licensees and equity investees, Starbucks produces
and sells a range of ready-to-drink beverages. The Company operates in three
business segments: United States (US), International and Global Consumer
Products Group (CPG).
Stock Activity
Last Price

25.29

52 Week High

25.37

52 Week Low

10.66

Volume

NA

Market

18.80

Average Daily Volume

8.70

Capitalization

Bil

(13wk)

Mil

Earnings/Share

0.75

50 Day Moving Average

23.00

200 Day Moving Average 19.87

Volatility (beta)

1.37

StockScouter
Rating

More financial ratios

Earnings Estimates

Detailed quote

Qtr(3/10) EPS
Financial data in U.S. dollars

Estimate

0.24

FY(9/10) EPS Estimate 1.10

Stock Price History

fyi

Last 3
Months
Last 6
Months

fyi

Last 12
Months

Chang

Relative

Strength

6.9%

55

21.6%

72

131.3%

76

Historical charts
Institutional Statistics
Analyst Consensus
Institutional
Ownership

Moderate
Buy
71.90%

More Analyst Ratings

Want to learn how to evaluate a stock? Walk through the steps using the
Research Wizard.

Current P/E

32.5
0

FY(9/11) EPS Estimate 1.26

Forward P/E
Next Earnings
Release: N/A

20.0
7

The description of the company's history, accompanied by present marketing practices, allows one to
describe Starbucks' marketing strategy as being that of a differentiator. As previously mentioned,
coffee is sold just about everywhere, as such, Starbucks has to make itself standout as a company that
is not only selling a cup of coffee, but an experience. In order to achieve this, the company has been
trying to differentiate each store within the company by having it represent the specific needs of each
community in which it is located. Individual stores serve as a medium for each community, and as an
extension of the community's values and ambitions.
This section will explain in detail what differentiates Starbucks from its competitors. The evaluation
will consist of analyzing the marketing concepts, principles, and strategic tools that Starbucks utilizes
in differentiating themselves. After creating a SWOT analysis for Starbucks, we will show how the
company can reduce some of the weaknesses that could pose a threat to it. This will be followed by
discussion on the greatest areas of resistance Starbucks faces - both internally and externally, and the
forecast of the affects Starbucks will experience if it continues with its current operational methods.

As stated earlier, Starbucks is a company that has differentiated itself by convincing consumers that it
is selling more than a cup of coffee. Further, their brand image is associated with a sense of community
activism. Starbucks feels that if they can identify with customer's societal endeavors, they would be
differentiating themselves on these principles. Five decades ago, General Electric stated, "the
marketing concept holds that the planning and coordination of all company activities around the
primary goal of satisfying customer needs is the most effective means to attain and sustain a
competitive advantage and achieve company objectives over time." (Mullins, Walker Jr., Boyd Jr., 36).
This statement made over fifty years ago still holds true today. A company's ability to adapt to changing
markets wants and needs is a key to its survival. Starbucks is a great example of a company that has
done a tremendous job in this area. The company managed to maintain the wants and needs of the
customers at the top of its list, and through a differentiated strategy earned incredible revenues from
a readily available commodity, coffee.
Starbucks is selling an easily accessible tangible product, but has evolved into a company that is doing
much more than that. There is also a philosophy and an image Starbucks is attempting to promote
through its products. The company is heavily involved in public relations, promoting an image of a
responsible company that has the resources to make good on its promises. Starbucks promotes ethical
sourcing, environmental stewardship, and community involvement and goes as far grading itself on the
company's website ("FY 2008 Global Responsibility Report"). The company boasts of being ethically
committed to all stakeholders in the business - from the coffee bean farmers to the issues of climate
change. Starbucks maintains that being ethical is a top priority of the organization. Starbucks is also
very much involved in community activities. The company sent 2,000 volunteers to Louisiana to help
locals get their lives back on track after Hurricane Katrina, and in several communities laid sod, and
planted over
1000 trees ("FY 2008 Global Responsibility Report"). As one volunteer said, "Starbucks is all about the
human connection" - this statement is a powerful representation of what the company represents. The
focus on the greater good of the customers is what Starbucks wants to be known for. Starbucks wants
its customers, and potential customers to perceive them as a company that has a positive impact on
the world. This is one of the ways Starbucks is using marketing concepts to strengthen its marketing
strategy of a differentiator.
As stated earlier, Starbucks historically positioned itself as an upscale brand. Due to the economic
downturn and increased competition from large quick-service restaurant chains and specialty retailers,
the company saw its profits being eroded. The company introduced new products that would appeal to
price-skittish customers and implemented techniques that would standardize its stores and reduce
costs. The new strategy carries with it its own risks. Starbucks has been known as the "anti-fast food"
chain, and any perception that it is now competing with McDonald's in bare-bone products and services
could risk brand devaluation. Starbucks's most loyal customers might start to see its stores as being no

different than any other McDonald's store, and move to rival coffee specialty stores or independent
coffee shops. The new standardization techniques could also face resistance from Starbucks employees
or "partners". Starbucks "partners" might see the new standardization techniques including time saving
measures and material cost reduction measures as a way of turning them into robots or factory
workers.

Since Starbucks enjoyed such a rapid growth in its business, the company expanded anywhere it saw
profitability for its stores. This has meant that Starbucks stores are as readily available as McDonald's
and as such the Starbucks "experience" the company asserts it provides, might be seen as no different
than the experience of McDonald's. As in the case of appealing to mass market with bottomless coffee,
Starbucks's core customer might move to other stores where they perceive the "experience" is still
being provided.
If Starbucks continues its store closing measures and implementation of its various cost cutting
initiatives, Starbucks is likely to see increased profitability. The firm has closed over 800 companyoperated stores in the United States and approximately 100 stores overseas ("Starbucks Posts Strong
Fourth Quarter and Fiscal 2009 Results"). Closures of these less profitable stores will likely increase
company's same store sales and profitability. The company is also introducing 100 new stores in US, and
200 new stores in International markets, which might positively affect the company provided they are
successful. Aggressive adoption of "no-frills" products to bring in new customers could also affect
Starbucks's profitability. Until now, any increase in commodity prices are more or less offset by
company's high prices, but a "no-frills" products would put downward pressure on company's
profitability, and possibly even damage Starbucks image as an upscale brand.
Starbucks Competitors
Starbucks' marketing strategy involved positioning its Starbucks outlets as a place where consumers can
spend time other than their home or work. This was done by making each of its stores as comfortable
and relaxing as possible. The coffee giant achieved these using creature comforts, such as comfortable
furniture and relaxing music. Over the past several years, Starbucks also included offerings such as
wireless internet, handicapped access, complimentary books, and common areas for collaboration.
While Starbucks stores are positioned as locations where customers can spend time in a comfortable
setting, their product lines are positioned at the higher end in regards to prices and quality.

Starbucks competitors in the coffee beverage sales include 7-Eleven, Dunkin Donuts, BIGGBY Coffee,
Caribou Coffee, McDonald's, Panera Bread, and Einstein Bagels. Competitors such as McDonald's and
Dunkin Donuts not only have extensive menus, but also the financial resources and position to leverage
their strengths to threaten Starbucks profitability.
In terms of perception, 7-Eleven and Dunkin Donuts provide coffee in a "no-nonsense fashion", which
attracts customers who are extremely price sensitive. Caribou Coffee's environment is similar to that of
Starbucks because of furniture, free internet, and cozy surroundings, but their lack of market
expansion has prohibited them from gaining the notoriety Starbucks has achieved. Finally, BIGGBY
Coffee is in the middle ground where the likes of Dunkin Donuts and Caribou Coffee separate
themselves.

Perceptual Map of Starbucks And It's Competitors (Coffee Shop Market)

The graph below illustrates customer perceptions regarding various brands:

Table of Contents

Executive Summary ------------------------------------------------------------------------ 3

Strategic Analysis --------------------------------------------------------------------------- 4
Analysis results ------------------------------------------------------------------------------ 7
SWOT ----------------------------------------------------------------------------------------- 8
Balanced scorecard ------------------------------------------------------------------------- 9
Recommendations --------------------------------------------------------------------------10
Executive Summary

Our consulting firm, NG Inc, was asked to research Starbucks and compile a strategic
analysis and balanced scorecard for their career objectives. Starbucks was founded in 1971 in
Seattle and continues to be the lead marketer of fine coffee at the retail level. It currently has
retail stores in all 50 states, as well as 36 countries outside the U.S. Its products and services
include: over 30 blends of coffee, hand crafted beverages, merchandise, fresh food, global
consumer products, Starbucks cards (rechargeable gift cards), and its brand portfolio
(subsidiaries such as the Tazo Tea Company and Ethos Water). After preparing a balanced
scorecard for their 2004 strategies, we compared the actual 2005 data to their goals to measure
how successful they were in achieving these goals.
In order to prepare a strategic analysis and balanced scorecard, we conducted extensive
research on the company. We analyzed their mission statement and additional goals stated in
press releases, articles, etc. and compared it to their financial results and actual data for 2004 and
2005.
Starbucks main goal is to increase revenue, which increased by $1,075,000,000 in 2005.
R&D expenditure increased by $2,200,000, which lead to more efficient equipment and
innovative products. 328 new retail stores and 400 new drive-thru stores were opened, which
increased convenience and frequency of visits for existing customers, as well as increased new
customers. Starbucks also added 11,200 distribution channels, which lead to more efficiency and
maximization of accessibility to its products. With competitive compensation and benefits,
employee turnover remained low and extensive in-house training for employees resulted in high
employee loyalty and skill.
Strategic Analysis
Starbucks Corporations main and overall goal, as is the nature of any company, is to increase
profits. In order to accomplish this, Starbucks focuses on a variety of strategies that allow the
company to maintain a competitive edge and constantly reinvent its approaches.
The cornerstone of Starbucks success is the opening of new stores. Starbucks wants to
enhance its brand name and equity, and accomplishes this by attracting new customers to
opening stores in their communities. New store locations can also maximize convenience,
therefore increasing the frequency of visits by existing customers. In addition, many of these new
stores are being development with drive-thrus. With this, Starbucks is targeting a particular
segment of its customer base that is comprised of professionals and on-the-go parents. To
measure the effectiveness of these strategies, Starbucks is continuously comparing data between
newly opened stores and existing stores, trying to increase the profitability of both units while
maintaining a steady growth rate.
Another strong point of Starbucks strategy is the value placed on customer satisfaction. By
extensively training employees for twenty hours before full employment, Starbucks hopes to
maximize employee responsibility and attentiveness, resulting in a decrease in wait time.
Furthermore, by closely tracking consumer needs and wants, Starbucks is able to introduce more
popular products with a decrease in time between new product introductions. By decreasing wait

time and increasing choices for customers, Starbucks hopes to increase loyalty among current
customers and hopefully attract new customers.
Starbucks also places great value on its employees which is the reason why Starbucks is
consistently known as one of the top companies to work for. Starbucks has great compensation
and competitive benefits packages for its employees. Even part-time workers get some type of
benefit package (ex: insurance). Starbucks treats its employees well because they believe that
the work environment should be family-oriented and that a happy employee makes a happy
customer.
In addition, the company is placing emphasis on substantially expanding its infrastructure by
investing in corporate and regional support facilities and personnel, as we well as establishing
more efficient distribution networks (Starbucks). Such investments are believed to be necessary
to maintain the current level of growth planned for international expansion, which brings us to
our next major point.
Starbucks believes that one of the key factors in sustaining long-term development is its
introduction to new countries and cultures. Compared to the year before, Starbucks has
significantly increased its pace in opening up international retail stores, reaching a little above
3,000 stores in foreign countries. This is obviously an intelligent move, as it already dominates
the US market, which constitutes only 300 million people, and makes up the bulk of its earnings,
whereas the rest of the world inhabits more than 6.5 billion people, of which, many use caffeine,
just not from Starbucks. The focus on foreign development, however, can come at great difficulty
as foreign cultures and governments will require more research, understanding, marketing and
political relationships. Another concern can be the lack of regulation and governmental control
regarding patents and trademarks, where other companies can mimic Starbucks brand and logo,
stealing their ideas and methods to use as their own, which is already a concern in China.
Furthermore, Starbucks is continually expanding their distribution outlets. In 2004, they had
20,000 outlets that sold their specialty products, including Wal-Mart, Target, a variety of other
grocery stores, and pharmacies. In 2005, the number of stores involved in the Starbucks
distribution channel increased to 31,000, exhibiting almost a 50% improvement and drastically
expanding their ability to reach customers.
Overall, the Starbucks Corporation is adept and knowledgeable when it comes to designing
approaches to further their profits and market share while maintaining a close relationship with
customers and their needs. Every aspect of their strategy has been carefully considered and
thoroughly planned out, and the immediate future only seems to hold great success for the
company and its associates.
Analysis results
Strategy

2004

2005

Difference Explanation

Net Revenue $5,294,247 $6,369,300 +$1,075,000 The combination of new retail stores, higher

revenues from existing stores, and the

introduction of new products resulted in
increased revenue.
R&D
Expenditure

$8,300

$10,500

+$2,200

Recent development efforts have resulted in

new brewing and espresso-making
equipment, successful flavor line extensions
(product development), and new items for
morning pastry and lunch menus.

Number of
Drive-Thru
Stores

700

1100

+400

To accommodate the early morning traffic

driven by time-conscious individuals,
Starbucks began including drive-thru stores
as a means of attracting this customer
segment.

New Stores
Opened

1,344

1,672

+328

Starbucks is domestically and internationally

expanding their enterprises to a variety of
markets, some of which, are currently
untapped. This enables the company to
develop in new communities and increase
customer service in extremely high traffic
areas.

Employee
Turnover

Distribution
Channels

Great compensation and benefits packages

lowered employee turnover. Furthermore,
profit sharing plans add to employee loyalty
and productivity. This helps to avoid
additional training costs. (Data could not be
found)
20,000

31,200

+11,200

Employee
Training
Hours

Increasing the number of stores involved in

the Starbucks distribution channel allows the
company to maximize accessibility to its
products.
Starbucks requires employees to undergo 20
hours of in-store and online training.

(Amounts in Thousands, Store Numbers Are Actual)

SWOT Analysis:
Strengths
Well-known brand identity and image
Majority market share

Weaknesses
Over-saturation of the market
Expensive Products

Recognized for Quality and Service

Low Employee Turnover
Employee Satisfaction due to
competitive compensation and benefit
packages
Global presence
Focus On Customer Satisfaction
High Visibility Locations
Innovative extensive R&D for
Equipment/Technology
Convenient
Drive-Thru Stores
Comfortable Ambiance
Internet Access (Wireless)

Non-smoking Areas

Lack of diverse music selections

Reliance on beverage innovation
Financial Problems in some international
stores
Government regulations and relations
Seasonal fluctuations in sales
Over-Reliance On Domestic Stores
Negative corporate image in Ecuador
due to relations with coffee growers
Lack of expansion
Lack of customer acceptance of new
products in existing and new markets
Non-smoking Areas

Opportunities
Threats
New Market Opportunities
Anti-Starbucks Groups
Internationally
Competition from restaurants, doughnut
Franchise Opportunities
shops, and other specialty coffee shops
Health drinks
Competition from supermarket sales
Organic drinks
concerning whole bean coffees
Seasonal coffee prices
Energy drinks
Imitations of Starbucks image and logo
Product Delivery To Home or Office
in China could potentially confuse
(Catering)
market and lessen opportunities in
Boba (Tapioca drinks)
foreign countries
Specialize more in international markets
Medical research concerning the effects
with local flavors
of caffeine
More bottled drinks such as bottled
Frappuccinos sold in supermarkets
Health conscious groups
More selection for kids drinks
Offer mini-meals with drinks at a set
price, such as coffee with a pastry or
sandwich

Market extension for Starbucks

merchandise, such as aprons, hats, etc.

Recommendations
Organic Foods and Health Drinks
Starbucks should provide organic foods and health drinks. Modern people are more health
conscious, particularly as new trends begin to focus on health-conscious marketability. Starbucks

can improve their image by paying more attention to their customers concerns. For example,
using more organic ingredients or diversifying their menu would provide fresh healthy coffee
substitutes, thus potentially attracting new customers as well as increasing the frequency of visits
from current customers who may not need caffeine during that particular time in the day.
Catering
Starbucks can expand their service to office or home delivery when the purchase size reaches a
reasonable minimum. Because the drive-thru retail store is increasingly being marketed towards
professionals on the go, Starbucks could attract potential clients, such as large firms or
companies, by delivering coffee directly to their business location. This would also allow for the
possibility of long-term contracts.
Increase International Locations
Starbucks should continue to open new locations worldwide. Starbucks is extremely dependent
on its domestic success, and yet has a variety of countries it has not explored opportunities in.
However, it is recommended that Starbucks tread lightly and with caution, insuring proper social
and cultural analysis before plunging into a country. This is apparent in the fact that Starbucks
was forced to close three retail stores in Singapore last year.
Community Outreach
Starbucks could refresh their corporate image by showing more concern for the communities
they are located in. Although a huge portion of the population is well aware of the fact that
Starbucks is successful in its endeavors, an extremely small percentage is knowledgeable or
exposed to its community or charity outreach programs. By increasing awareness of its socially
responsible characteristics, Starbucks might lull or appease antagonistic groups, thus enhancing
their public image and brand equity.
Product Extension and Specialization
Lastly, Starbucks could try to extend its menu selection to include drinks related to particular
cultures. For example, the Chinese culture focuses more on tea than coffee, and although
Starbucks has a selection of different types of tea, it could further entice this consumer segment
by introducing boba, a drink that incorporates little balls of jelly called tapioca. It could present
similar drinks that are popular in other cultures as well. Another example is in Japan, Starbucks
introduced a Matcha (green tea) latte and Frappuccino. This caters more to local tastes and
preferences, which increases customer satisfaction. Starbucks should research local cultures
more so that it can adapt its menu to meet the needs of its international customers.
Increase Bottled Drinks
Starbucks currently sells bottled Frappuccinos in supermarkets and specialty stores, which
remain extremely popular among consumers. Starbucks should increase its product line of
bottled drinks to include other favorites, such as the Iced Chai Tea Latte or even seasonal drinks,

such as the Gingerbread Latte. This would increase sales and customer awareness of the products
it sells in its retail stores.
Increase Selection for Childrens Drinks
Since Starbucks aims to be a family environment and cater the needs of all family members,
it should increase its menu items for children. It currently offers hot chocolate and apple cider for
children, but it could offer a wider range of products, such as milk shakes or juice, as well as
more bakery items that satisfy childrens taste preferences. This would entice parents to bring
their children in, especially working parents who want to go to Starbucks but feel that that they
cant take their children with them because they will be to antsy, which would generate more
sales.
Offer Set Mini-meals
Offering value meals similar to fast food restaurants would increase sales because it increases
the average sale per customer. Working men and women come into Starbucks for something
quick and convenient, they dont always have time to calculate how much separate menu items
will cost or they dont really think about getting a snack, so if you market mini-meals that
include a latte and a pastry or sandwich together at a set price, it encourages them to purchase
additional items. This also increases awareness of Starbucks additional menu items, such as the
fresh food and pastries.
Market Extension of Starbucks Merchandise
Increasing the Starbucks merchandise line to include more branded items, such as baseball
hats, canvas tote bags, umbrellas, aprons (and other kitchen accessories), not only increases sales
but helps Starbucks achieve its ultimate goal of becoming the most recognizable brand in the
world. More people will be wearing the Starbucks logo to show their loyalty and support of the
brand, which increases awareness and helps establish Starbucks as a mega-brand.