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case study on starbucks

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  • 1. • 1971 - Starbucks Coffee opens is first store in the Pike Place Market in Seattle, Washington. • 1984 - Howard Schultz convinces the original founders of Starbucks to test the coffee bar concept. • 1988 - Starbucks comes out with their first mail-order catalog, enabling mail-ordering of their coffee in all 50 states. • Grew from 55 stores in 1989 to over 15,000 stores today • Products sold include: •- beverages •- whole coffee beans - pastries - coffee-related retail items
  • 2. Interior & Exterior of starbucks
  • 3. Introduction to Starbucks  Starbucks Corporation is an American global coffee company and coffeehouse chain based in Seattle, Washington.  Headquarters: Seattle, WA, United States of America  Founded: 1971, Pike Place Market, Seattle, Washington, United States  CEO: Howard Schultz  Founders: Gordon Bowker, Jerry Baldwin, Zev Siegl
  • 4. Mission Statement
  • 5. Guiding Principles of starbucks • 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.
  • 6. Coffee: Some Facts First consumed in East Africa during the 11th century. Quality of beans – Robusta & Arabica. Produced in 70 countries. Global coffee production – 134.2 mn bags. More than $70 bn retail sales globally.
  • 7. Industry Definition Specialty Eatery Industry  Food and beverages  Steady growth in the 90s leading to increased competition  Demand for specialty food services has increased in recent years
  • 8. Percentage Share of different countries in Number of Starbucks Stores UNITED STATES ASIA-PACIFIC 12% EUROPE-AFRICA NORTH-SOUTH AMERICA 2% 1% 85%
  • 9. Yearly Sales Data of Starbucks NO OF STARBUCKS STORES OVER THE YEARS 12000.00 8000 10000.00 7000 8000.00 6000 5000 6000.00 Years 4000 Years 3000 4000.00 2000 2000.00 1000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 0.00 1988 1987 0
  • 10. Process Differentiation (the value chain) Financing, Legal Support, Accounting Firm Infrastructure Recruiting, Training, Incentives, Feedback Human Resources Equipments, Production, Packaging, Selling Procurement Getting the coffee : Where & How Inbound Logistics Billing and collection Delivering the product Promotions and Advertising Technology & Development Customer satisfaction and feedback Primary activities
  • 11. Industry and Competitive Analysis Market Structure Monopolistic Competition Competitive Activity Many companies are in the market and competition is fierce Competitors use location, product mix, and store atmosphere differentiation to establish market niche Industry Costs and Capital Structure Low to moderate costs for each location Major start-up expenditures are property and equipment Major operating costs are labor and cost of sales
  • 12. International Competitors Dunkin Donuts Sells coffee beans both online & at physical outlets Fresh brew coffee Similar services & products as Starbucks Mc Donald’s Offers number of specialty coffees Huge penetration Established fast-food retailer
  • 13. VALUABLE RESOURCES: Creating Competitive Edge • Physical Resources –Large number of outlets (Hub & Spoke Model) –Operations in 40 countries with 9000 cafes –Hi-tech coffee machines & equipments • Intangible Resources –Techniques to roast & brew coffee –Large satisfied customer base –Building employee relationship –Reputation for having the finest products and services in the world • • • • High quality of products Quality of Workforce Strategic Store Location Tangible Resources •Coffee beans (Ex. They have sole ownership of the Narino Supremo beans, which is considered to be one of the highest quality coffee beans in the world.) • Intangible Resources •Perception/Reputation of quality (beans, company name, etc) •Largest and best known of coffee house chains
  • 14. Corporate Culture: Company Values • No compromise on Quality • No Franchising • Not selling artificially flavored coffee beans • Employee freedom of expression • Customer is of Prime Importance •“Just Say Yes” to customer requests •Modify Products as per customer’s preferences •Satisfy customer at all costs »Eg: Providing a free-drink coupon if the customer is not satisfied
  • 15. Industry PEST Analysis Political Influences State & Local government controls Economic Influences Changes in disposable income could influence purchase levels Social Influences Consumer preferences could shift from coffee to other beverages Technological Influences Use of technology can improve operational efficiencies
  • 16. SWOT Analysis Strengths  ever experienced a strike or work stoppage  Good relationships with coffee suppliers  Value employees  Located in high traffic areas  Employee turnover rate is 60%, compared to 140% in the fast food business  They don’t move into new markets until they dominate the ones they expand into
  • 17. SWOT Analysis Weaknesses  Excessive focus  Employees report to two division heads  Increasing shareholders dilutes their interest  They have expanded too quickly, and have already saturated the US market  They do not allow smoking in their stores, alienating some of their customers
  • 18. SWOT Analysis Opportunities  Expansion into European and Latin American markets  Distribution agreements, such as hotels, airlines, and office coffee suppliers  Reducing alcohol consumption in the US leads to bars being used less which leads to people needing another place to go  Use supermarkets as a way of expanding into international markets  Numerous brand extension  Improve on perception of instant and decaffeinated coffee to expand that market share
  • 19. SWOT Analysis Threats  The coffee market is saturated  Cost of coffee beans is expected to rise in the near future  Supermarkets threaten whole bean sales  Farmers might switch from coffee to vegetable crops  High competition from Japanese competitors  Consumers trend toward more healthful fare
  • 20. Customer Willingness to Pay Why go to Starbucks? A place to think and Imagine A place to gather and talk A Third Place beyond Work and Home Leather Chairs Newspapers Couches The Authentic Coffee Experience: the artistry of espresso making Fast Service and Quiet Moments Stores Designed on 4 stages of coffee making: growing, roasting, brewing and aroma Mails, Music, Work
  • 21. Conclusion Starbucks has been increasing its debt every year, and at a pace that is faster than their assets are growing (which is clearly unhealthy). This is why we chose for the firm to slow down its expansion and to focus more on marketing their products. In such a saturated market as the one that they are in Starbucks needs to focus on increasing consumer awareness and to decrease debt as much as possible. In closing we believe that Starbucks can become even more profitable if they slow down their expansion and concentrate on the stores that they already have open.