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INTRODUCTION

Starbucks is the largest coffee outlet in the world, with close to seventeen thousand shops in approximately fifty countries or provinces.

It is headquartered in Seattle, Washington.

Starbucks is an international Corporation whose stocks are traded on the NYSE.

Starbucks in 2003 was listed as a Fortune 500 firm, ranked 465. By the end of 2010, they were ranked 241.

HISTORY
1971 Starbucks Coffee, Tea, and Spice store (coffee bean roasting) opened in Seattles Pike Place Market.

1992 Starbucks decertified the union and made IPO.

1993 Ventured with Barnes & Noble

1987 Howard Schultz joined Starbucks.

During 2000,Opened 200 Stores outside U.S.

2007-08 McDonlad entered coffee business & Starbucks closed 600 stores in U.S.

LOGOvolution

VISION STATEMENT
To inspire and nurture the human spirit- one person, one cup, and one neighborhood at a time.

PRICE

PLACE

MARKETING
PROMOTION
PRODUCT

SEGMENTS

SKIMMING PENETRATION

TARGETING

DOWNSTREAMING

UNITED STATES INTERNATIONAL GLOBAL CONSUMER PRODUCTS

POSITIONING

Dunkin Donuts Caribou Coffee Peets Coffee and Tea McDonalds Krispy Kreme Doughnuts

COMPETITORS

FINANCIAL POSITION
RATIOS
Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Total Asset

FORMULA
Gross Profit/Sales Operating Profit/Sales Net Profit/Sales Total Assets/Sales

2007
59.1%

2008
55.2%

11.5%
7.2% 56.9%

4.8%
3% 54.6%

SCOT ANALYSIS

STRENGTH

CHALLENGES

OPPORTUNITIES

THREATS

Starbucks is the market leader in the coffee Market.

Customers are satisfied with the quality and taste of Coffee.


High brand equity.

Pricing are higher as compared to the competitors.

Entry into Asian market like Pakistan, India and Bangladesh.

Numbers of competitors are increasing, like Barista, Caf coffee Day, Gloria jeans coffee. Variation in coffee prices in developing countries People started to become more health conscious

Market penetration in International countries.

High operating cost


Co-branding with other food manufactures.

Operating in 40 countries worldwide. Huge number of employees approx. 13 thousand.

The business profits are highly dependent on coffee product.

Labor Unions issues in US and international countries Starbucks facing huge resistance in international countries over cultural and political issues.

Whole bean sales in supermarkets like.

SCOT STRATEGIES
SO Strategies
Do advertisements about the FREE internet connections and the excellent service they provide. Starbucks shall increase the healthy products into market as the demand for it is high.

CO Strategies
Reduce the price and Advertise the products all over the places. Do R&D to sell products at supermarkets without reducing the quality with cheap price

ST Strategies
Starbucks needs to change its market strategy by reducing the price to compete with the competitors.

CT Strategies
Create new complementary products which contain good quality and lower price to attract more customers. Starbucks needs to analyze the way to reduce the risks of selling its coffee products at supermarkets as customers are demanding for it.

STARBUCKSS FIVE-FORCE COMPETITIVE ANALYSIS

2. Threat of substitute product & services

4. Power of suppliers.

1. Rivalry among competing sellers in the industry

5. Power of buyers.

3. Potential of new entrants

Political

PESTLE ANALYSIS

Environmental

Economical

Legal

Social

Technological

THE TOTAL IFE WEIGHTED SCORE


Strong 3 to 4 Average 2.0 to 2.99 Weak 1.0 to 1.99

THE TOTAL EFE WEIGHTED SCORE

High 3 to 4

II

III

Medium 2.0 to 2.99

IV

VI

Low 1.0 to 1.99

VII

VIII

IX

RELATIVE MARKET SHARE


HIGH LOW

BCG MATRIX

II

I
Market Penetration Market Development Product Development Divestiture

MARKET GROWTH RATE

Backward, Forward or Horizontal Integration. Market Penetration Market Development Product Development

HIGH

III
Product Development Diversification Retrenchment Divestiture

IV
Retrenchment Divestiture Liquidation

LOW

BCG MATRIX

SPACE MATRIX
FINANCIAL STRENGTHS
KEY FACTORS RATING

INDUSTRY STRENGTHS
KEY FACTORS 1. Starbucks Coffee Liqueur was the top selling new spirit product, grossed sales over $8million annually. 2. Starbucks agreed to serve Starbucks Coffee in all United flights. 3. Starbucks Everywhere approach has RATING

1. A Starbucks asset is financed through equity and is safe if creditors start to demand repayment of debt. Long term debt-to-equity ratio is only 0.0017
2. Starbucks Return on Asset ratio shows that in year 2008, the efficiency of using assets to generate earning has increased from 12% to 14%. 3. Even during recession they have earned a decent amount of net income .

increased foot traffic for all the stores in area.

This makes customers easy to fine Starbucks all the places in town.

TOTAL

12

TOTAL

12

ENVIRONMENTAL STABILITY
KEY FACTORS 1. Starbucks products prices are high compared with competing coffee houses. They price their products -4 RATING

COMPETITVE ADVANTAGE
KEY FACTORS 1. Starbucks coffee and beverages are high in quality brewed by well trained employees. 2. Starbucks teamed up with T-mobile WI-Fi service to provide internet access to all over Starbucks Coffeehouse RATING

-1

several dollars below then Starbucks price.


2. Demand for Starbucks products to be supplied in supermarkets increase. But, doing that will put Starbucks business in risk as customers dont know the way to brew the coffee. 3. Increase in world coffee bean price in 2001, forced Starbucks to increase its beverages and coffee sold at retail. TOTAL -9 -3 -2

-1

3. There are 16,120 Starbucks coffeehouses worldwide and plan to open another 1800 stores. 4. Starbucks is a customer oriented Coffeehouse.

-2

-2

TOTAL

-6

FS Average is 13/3 = 4.3 IS Average is 12/3 = 4.0 ES Average is -9/3 = - 3.0 CA Average is -6/4= - 1.5

Directional Vector Coordinates:


X- axis: 4.0 + (-1.5) = 2.5 Y- axis: 4.3 + (-3.0) = 1.3

GRAND STRATEGY MATRIX

KEY FACTORS

WT

STRATEGY 1 AS TAS

STRATEGY 2 AS TAS AS

Strategy 3 TAS

OPPORTUNITY
Gourmet coffee consumption rose with the drinker's educational level. 0.1 0.08 0.09 0.1 0.08 0.09 2 4 3 2 1 2 0.2 0.32 0.27 0.2 0.08 0.18 4 3 4 4 4 3 0.4 0.24 0.36 0.4 0.32 0.27 1 2 2 3 3 4 0.1 0.16 0.18 0.3 0.24 0.36

QSPM Matrix

16 % of the U.S. Adult population consumed specialty coffee on a daily basis, whereas 63 percent indulged occasionally
The growth in popularity of specialty coffees has increased, as only 13 percent and 59 percent of people reported daily and occasional consumption, respectively, in 2002 Another trend that has surfaced in the past decade has been consumer requests for organic coffees, and more emphasis was placed by retailers on the growing environment of the beans Consumers are becoming more health conscious and are looking for sweets and snacks that are low in carbs / sugar and calorie International market has a stronger economy and accordingly, consumers would be able to pay premium price for specialty or gourmet coffee

THREATS
The 2007-2009 global recession negatively affected the specialty coffee industry Recent trends have shown that some of the consuming public is concerned about the nutritional value of such products as those offered by the specialty coffee sector and have even challenged the correctness of the labeling and calorie information posted on the products available at retail outlets. Smaller competitors are expanding their markets as well as their product line offerings Competitors such as McDonald's and Dunkin donuts are becoming stronger in offering specialty coffee along with other complementary products Volatility in the stocks and coffee price could impact the purchasing power for the buyers 0.1 4 0.4 2 0.2 3 0.3

0.09

0.36

0.09

0.27

0.1 0.1 0.07 1

2 4 28

0.2 0.4 2.61

3 3 31

0.3 0.3 2.88

4 2 27

0.4 0.2 2.51

TOTAL

KEY FACTORS

WT weight

QSPM Matrix

strenghths Starbucks expects to add approximately 20 net new stores to its global store base in fiscal 2009 by closing approximately 425 company-operated stores in the United States and adding of approximately 60 company-operated stores internationally The company plans to open approximately 65 net new licensed stores in the United States and approximately 320 net new licensed stores internationally Licensing revenues increased primarily due to higher product sales and royalty revenues as a result of opening 438 new licensed retail stores in the last 12 month Strong marketing and promotional campaign such as product placement in major TV series Starbucks also provides electrical outlets and, in some stores, wireless access, for customers who might need to use their MP3 players or laptop computers Starbucks' products can be found in convenience stores, grocery stores, department stores, movie theaters, businesses, schools, and even airports Starbucks is rated by Fortune as one of the best top 10 places to work Starbucks also encourages the use of its Web site where customers are able to register their Starbucks' cards, receive nutritional information about Starbucks' products, shop online, search for careers, and much more

STRATEGY 1 STRATEGY 2 Strategy 3 AS TAS AS TAS AS TAS strategy 1 Strategy2 Strategy3 AS TAS AS TAS AS TAS 0.06 4 0.24 3 0.18 2 0.12 0.05 0.07 0.07 0.09 0.06 0.07 0.04 0.06 2 2 3 1 4 0.1 0.21 0.07 0.36 0 0.14 0 0 0 4 1 2 3 3 0.05 0.14 0.21 0.27 0 0.28 0 0 0 0 3 0.21 0 3 0 0.18 4 2 3 4 4 4 2 0.2 0.28 0.28 0.18 0 0.21 0 0 0 0 0.14 0 0 0.24

weakness 47 percent drop in earnings in one year (2008) For the 26 weeks ending March 2009, Starbucks' revenues decreased 7 percent to $4.95 billion and net income decreased 72 percent to $89.3 million Moody's Investors Service recently downgraded Starbucks' credit ratings The U.S. company operated retail business continued deteriorating trends For the second quarter of fiscal 2009, U.S. total net revenues were $1.8 billion, a decline of $131.5 million, or 6.8 percent, due to decreased revenues from company operated retail stores. Many of Starbucks' International operations are in early stages of development that require a more extensive support organization relative to the current levels of revenue and operating income in the United States International total net revenues were $433.7 million for the 13 weeks ended March 29, 2009, down $59.7 million, or 12.1 percent, compared with the same period last year, primarily due to the impact of a stronger U.S. dollar relative to the British pound and Canadian dollar. Global Consumer Products Group (CPG) total net revenues decreased by 2 percent to $94.8 million for the second quarter of fiscal 2009, due primarily to lower margin on sales of packaged coffee as a result of discounting, as well as lower volume to the trade. Sum Total 0.07 0.06 0.04 0.06 3 4

0 0.28 0 0 0.18

0.06

0.12

0.18

0.24

0.03

0.09

0.06

0.12

0.04

0.12

0.08

0.04

0.07 1

4 35

0.28 2.19 4.8

3 32

0.21 2.05 4.93

2 36

0.14 2.19 4.7

Starbucks success is achieved through a few factors:

CONCLUSION

Outstanding Quality of the coffee brewed Excellent service provided at the stores Fast growth of new stores all around the world

Starbucks encounters aggressive competition in all areas of its business activity, specially by McDonalds and Dunkin Brands.

Their strategy remains one of progressive expansion with measured caution. It is gradually increasing its ground in international markets.

As Starbucks have a good financial capacity with good strategies; it can overcome all the competitors to shine high as the first class coffee purveyor.

RECOMMENDATIONS

Corporate Level
Starbucks coffees price are much more expensive than other market competitor products because Starbucks purchases the highest quality coffee beans and price-war advantage for its competitors in these challenged economic times. Even though Starbucks has its own customer who spends their money to get the quality coffee, it still has to look for the other people who are running to the next store.

Functional Level
Advertisement can develop through internet. Starbucks innovative nature should enable capitalization on the social networks like Twitter and Facebook. Additionally, Starbucks should even have mobile application. Not to change its positioning from luxury to low cost coffee provider because Starbucks enjoy very high high customer loyalty. They should grow more affiliation of Seattles Best Coffee with other QSRs just like they did with Burger King and increase its awareness as a subsidiary of Starbucks. Distribute packaging of Starbucks instant coffee will definitely increase the sales as it is a demand from customers.

Business Level
Develop series of new coffee, tea and fruit drinks with better nutritional values for health conscious customers. Initially, enter selected market with predatory pricing strategy and then move to larger market. For the last few years, the company over-expanded by opening too many stores and some too close to each others. Thus, reduce the low/nonperforming outlets and especially those which are very close to each other. Establish more stores in developing nations like China and India where the impact of recession was very low. Provide Starbucks coffee in Premium Airlines and Seattles Best Coffee in Economy Airlines.