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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

Industry and Competitive


Analysis
Coffee industry
Competitor analysis
Generic competitive strategy
PEST analysis
Site 7-S analysis

Conclusion
Recommendation

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

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.

1982

Howard Schultz joined Starbucks.

1986

Howard Schultz established Il Giornale Coffee Company.

1987

Il Giornale acquired Starbucks and changed the name into


Starbucks Corporation.

1992

Starbucks decertified the union and made IPO.

1995

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

About Starbucks

Mission Statements
Company Mission Statement:

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

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

Product
Coffee

Line

purchasing strategy

Site 7S Model
Structure

S to re M a n a g e r
A s s is t a n t M a n a g e r
S h ift S u p e r v is o r s
B a r is t a s

B a r is t a s

B a r is t a s

There are one store


manager, one assistant
manager, some shift
supervisors and 16
partners/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