Starbucks Global Quest in 2006: Is the Best Yet to Come?

Danny Nugroho RP Retnowulan

13967/PS/MM/06 19421/PS/MM/06

Presentation Outline

Introduction to Starbucks Industry Overview Company Overview Site Analysis Recommendations for Improvement Focused Recommendation for Improvement Final Action Plan Impact Analysis Wrap Up

Presentation Outline

About Starbucks

Overview Timeline Corporate Values and Business Principles Mission Statements Corporate Social Responsibility

Industry and Competitive Analysis Coffee industry Competitor analysis Generic competitive strategy PEST analysis Site 7-S analysis Conclusion Recommendation

Starbucks Strategy

Store expansion strategy Product line Coffee purchasing strategy

Presentation Outline

About Starbucks

Starbucks Strategy Industry and Competitive Analysis Conclusion Recommendation

About Starbucks

Overview

Timeline Corporate Values and Business Principles Mission Statements Corporate Social Responsibility

Overview

Established in 1971 at Seattle, Washington Famous for its quality fresh-roasted coffee beans and stylish atmosphere. Over 9,000 stores worldwide Product lines include : beverages (coffee, Tazo tea, soda, juices) pastries whole coffee beans coffee-related hardware and equipment merchandise (mug, CDs)

Timeline
1971

Starbucks Coffee, Tea, and Spice store (coffee bean roasting) opened in Seattles Pike Place Market.
Howard Schultz joined Starbucks.

1982 1986 1987

Howard Schultz established Il Giornale Coffee Company.

Il Giornale acquired Starbucks and changed the name into Starbucks Corporation.

1992
1995

Starbucks decertified the union and made IPO.

Starbucks Coffee International opens in Japan Starbucks implemented ESOP.

Timeline

1996 Starbucks began selling bottled Frappuccino. 1999 Starbucks acquired Tazo Tea. 2000 Acquired Hear Music, a San Francisco-based company 2003 Starbucks acquired Seattles Best Coffee 2005 Introduced Starbucks Coffee Liqueur; Acquires Ethos Wate

Corporate Values and Business Principles

Building a Company with Soul
Opposing Franchising because of Quality Control and Culture Only selling coffee beans without artificial flavors. Satisfy customers by all means. Employees contribution and involvement in making Starbucks a better company

Mission Statements
Company Mission Statement:

About Starbucks

Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.

Environmental Mission Statement:

Starbucks is committed to a role of environmental leadership in all facets of our business.

Mission Statement
Six guiding principles: 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.

Corporate Social Responsibility

Starbucks focuses its efforts on improving social and economic conditions for coffee farmers; minimizing environmental impact; making a positive contribution in the communities where they do business; and providing a great work environment for their partners (employees). Establish the Starbucks Foundation in 1997 A major contributor of CARE, worldwide relief and development organization (Health, Education, and Humanitarian aid) Provides financial support to community literacy organizations Participate in local charitable projects. 2004 EnviroStars Recognized Leader Award for its community service and environmental activities

Starbucks Strategy
Rapid store expansion strategy Domestic store expansion International store expansion Employee Training and Recognition Real Estate, Store Design, Planning, and Construction Store ambience
Product Coffee

Line

purchasing strategy

Starbucks Strategy
Rapid store expansion strategy
Domestic store expansion A three-year expansion strategy Starbucks everywhere approach International store expansion Company-owned and company-operated stores or licensing Created a new subsidiary, Starbucks Coffee International Expanded its consumer products channel in South Pacific region

Starbucks Strategy
Employee Training and Recognition Systems to recruit, hire and train baristas and store managers screening training programs awards for partners Real Estate, Store Design, Planning, and Construction A broad range of store formats (the right image and character) A stores of the future project team High-traffic, high-visibility store locations Control of average store opening costs Wi-Fi availability at stores

Starbucks Strategy
Store ambience
The concept of everything matters
Assessment of standards

Starbucks Strategy
Product Line
Wide range of products choices Special product promotion Selling music CDs Joint ventures PepsiCo Dreyers Grand Ice Cream Jim Beam Brands Acquisitions Hear Music Ethos Water Starbucks Cards Partnership with Bank One

Starbucks Strategy
Coffee purchasing strategy
Building relationship with growers and exporters, checking on agricultural conditions and crop yields, and searching out varieties and sources that would meet Starbucks standards. Using fixed-price purchase commitment and purchasing coffee future contracts Contributing to the sustainability of coffee growers and helping environment conservation Purchasing and marketing Fair Trade Certified coffee Promoting coffee cultivation methods that protected biodiversity and maintained a healthy environment

Industry and Competitive Analysis

Coffee Industry

C Corporate Values and Business Principles Mission Statements Corporate Social Responsibility

Industry and Competitive Analysis

Coffee industry

Coffee drinking trend Coffee beans production

Competitor analysis

Future goals Current strategy Assumptions Capabilities

Generic competitive strategy PEST analysis Site 7S analysis

Industry and Competitive Analysis

Coffee industry
Coffee

drinking trend

Coffee is the second most consumed drink after water. Americans substitute specialty coffee for alcohol. Coffee shops are a great place to meet people. Coffee is an affordable luxury. Consumers are more knowledgeable about coffee.
Coffee

beans production

In 1994, coffee was the second most traded commodity after Oil. There are two types of Coffee, namely basic and specialty.

Industry and Competitive Analysis

Competitor analysis
2 Types of Competitor: Coffee shops and restaurants Nationwide coffee manufacturers (rival brands of specialty coffee)

Industry and Competitive Analysis

Competitor analysis
Future goals

To grow bigger To better position themselves as an alternative to Starbucks

Current strategy
Merger of local and regional chains of coffee shops etc.
Assumptions Competitors assumptions about themselves Competitors assumptions about the industry and other companies in it

Industry and Competitive Analysis

Competitor analysis

Capabilities (areas of competitors strengths and weaknesses) Product Dealer/distribution Operations R&D Financial strength Organization & managerial ability Personnel turnover

Industry and Competitive Analysis

Generic Competitive Strategy

Industry and Competitive Analysis

Focused differentiation
Serve

niche buyers better than rivals Buyers have distinctive preferences, special requirements, or unique needs Have unique capabilities to serve needs of target buyer segment Big enough to be profitable and offers good growth potential Costly or difficult for multi-segment competitors to meet specialized needs of niche members Starbucks has resources and capabilities to effectively serve an attractive niche Few other rivals are specializing in same niche

PEST Analysis
Political

Influences

Relationships between U.S. and countries producing coffee beans Environmental regulations Industry-specific regulations

Economic

Influences

Demand for food and beverages Customers buying power Exchange rate & taxation

PEST Analysis
Social

Influences

Trend Consumer preferences Changes in lifestyle and occupation Education

Technological

Influences

advances in manufacture
biotech and agricultural development IT developments

Site 7S Model
Strategy
Rapid

store expansion strategy Line

Product Coffee

purchasing strategy

Site 7S Model
Store Manager

Structure
There are one store manager, one assistant manager, some shift supervisors and 16 partners/baristas

Assistant Manager

Shift Supervisors

Baristas

Baristas

Baristas

Site 7S Analysis
Staffing
Employee benefits package includes base salary, health care benefits, stock option plan, and Health care benefits include preventive care, crisis counseling, dental care, eye care, mental health, chemical dependency, and medical costs for terminal illness up for 29 months. Employees trainings that include basic 24 hour-training, Star Skills, Coffee Master Program, Servant Leadership Workshop, Career Power and Career Power for Coaches Workshop. Awards for partners, which range from frequent awards to highlevel cash awards.

Site 7S Analysis
Systems
Centralized control over individual stores by headquarters Total Quality Management (i.e. Just-In-Time) Information system to support business operations.

Site 7S Analysis
Skills
coffee making customer service sales techniques

Site 7S Model
Style

Increase motivation through reviews and raises.

Employees are allowed to make decisions and participate in

Site 7S Model
Shared

Values

Fun working environment

Treat each other with respect and care Diversity is encouraged. Maintain highest quality standards for products Satisfy customers and compensate the unsatisfied ones.

CSR. Respect employees by calling them partner. The importance of profitability for future success

Conclusion

Focuser can defend against challengers via superior ability to serve niche members

Recommendation

Focuser can defend against challengers via superior ability to serve niche members

Starbucks Corporate Strategy