Starbucks Strategy


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Is the Best Time Yet to Come?

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  • Starbucks Strategy

    1. 1. Starbucks’ Global Quest in 2006: Is the Best Yet to Come? Danny Nugroho RP – 13967/PS/MM/06 Retnowulan – 19421/PS/MM/06
    2. 2. Presentation Outline <ul><li>Introduction to Starbucks </li></ul><ul><li>Industry Overview </li></ul><ul><li>Company Overview </li></ul><ul><li>Site Analysis </li></ul><ul><li>Recommendations for Improvement </li></ul><ul><li>Focused Recommendation for Improvement </li></ul><ul><li>Final Action Plan </li></ul><ul><li>Impact Analysis </li></ul><ul><li>Wrap Up </li></ul>
    3. 3. Presentation Outline <ul><li>About Starbucks </li></ul><ul><ul><li>Overview </li></ul></ul><ul><ul><li>Timeline </li></ul></ul><ul><ul><li>Corporate Values and Business Principles </li></ul></ul><ul><ul><li>Mission Statements </li></ul></ul><ul><ul><li>Corporate Social Responsibility </li></ul></ul><ul><li>Starbucks’ Strategy </li></ul><ul><ul><li>Store expansion strategy </li></ul></ul><ul><ul><li>Product line </li></ul></ul><ul><ul><li>Coffee purchasing strategy </li></ul></ul><ul><li>Industry and Competitive Analysis </li></ul><ul><ul><li>Coffee industry </li></ul></ul><ul><ul><li>Competitor analysis </li></ul></ul><ul><ul><li>Generic competitive strategy </li></ul></ul><ul><ul><li>PEST analysis </li></ul></ul><ul><ul><li>Site 7-S analysis </li></ul></ul><ul><li>Conclusion </li></ul><ul><li>Recommendation </li></ul>
    4. 4. Presentation Outline <ul><li>About Starbucks </li></ul><ul><li>Starbucks’ Strategy </li></ul><ul><li>Industry and Competitive Analysis </li></ul><ul><li>Conclusion </li></ul><ul><li>Recommendation </li></ul>
    5. 5. About Starbucks <ul><ul><li>Overview </li></ul></ul><ul><ul><li>Timeline </li></ul></ul><ul><ul><li>Corporate Values and </li></ul></ul><ul><ul><li>Business Principles </li></ul></ul><ul><ul><li>Mission Statements </li></ul></ul><ul><ul><li>Corporate Social </li></ul></ul><ul><ul><li>Responsibility </li></ul></ul>
    6. 6. Overview <ul><li>Established in 1971 at Seattle, Washington </li></ul><ul><li>Famous for its quality fresh-roasted coffee beans </li></ul><ul><li>and stylish atmosphere. </li></ul><ul><li>Over 9,000 stores worldwide </li></ul><ul><li>Product lines include : </li></ul><ul><li>− beverages (coffee, Tazo tea, soda, juices) </li></ul><ul><li>− pastries </li></ul><ul><li>− whole coffee beans </li></ul><ul><li>− coffee-related hardware and equipment </li></ul><ul><li>− merchandise (mug, CDs) </li></ul>
    7. 7. Timeline <ul><li>1971 – Starbucks Coffee, Tea, and Spice store (coffee bean roasting) </li></ul><ul><li> opened in Seattle’s Pike Place Market. </li></ul><ul><li>1982 – Howard Schultz joined Starbucks. </li></ul><ul><li>1986 – Howard Schultz established Il Giornale Coffee Company. </li></ul><ul><li>1987 – Il Giornale acquired Starbucks and changed the name into </li></ul><ul><li> Starbucks Corporation. </li></ul><ul><li>1992 – Starbucks decertified the union and made IPO. </li></ul><ul><li>1995 – Starbucks Coffee International opens in Japan </li></ul><ul><li>− Starbucks implemented ESOP. </li></ul>
    8. 8. Timeline <ul><li>1996 – Starbucks’ began selling bottled Frappuccino. </li></ul><ul><li>1999 – Starbucks acquired Tazo Tea. </li></ul><ul><li>2000 – Acquired Hear Music, a San Francisco-based company </li></ul><ul><li>2003 – Starbucks acquired Seattle’s Best Coffee </li></ul><ul><li>2005 – Introduced Starbucks Coffee Liqueur; Acquires Ethos Wate </li></ul>
    9. 9. Corporate Values and Business Principles <ul><li>Building a Company with Soul </li></ul><ul><li>Opposing Franchising because of Quality Control and Culture </li></ul><ul><li>Only selling coffee beans without artificial flavors. </li></ul><ul><li>Satisfy customers by all means. </li></ul><ul><li>Employees’ contribution and involvement in making Starbucks a better company </li></ul>
    10. 10. About Starbucks Mission Statements <ul><li>Company Mission Statement: </li></ul><ul><ul><li>“ Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” </li></ul></ul><ul><li>Environmental Mission Statement: </li></ul><ul><ul><li>“ Starbucks is committed to a role of environmental leadership in all facets of our business.” </li></ul></ul>
    11. 11. Mission Statement <ul><li>Six guiding principles: </li></ul><ul><li>Provide a great work environment and treat each other with respect and dignity. </li></ul><ul><li>Embrace diversity as an essential component in the way we do business. </li></ul><ul><li>Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee. </li></ul><ul><li>Develop enthusiastically satisfied customers all of the time. </li></ul><ul><li>Contribute positively to our communities and our environment. </li></ul><ul><li>Recognize that profitability is essential to our future success. </li></ul>
    12. 12. Corporate Social Responsibility <ul><li>“ 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).” </li></ul><ul><li>Establish the Starbucks Foundation in 1997 </li></ul><ul><li>A major contributor of CARE, worldwide relief and development organization (Health, Education, and Humanitarian aid) </li></ul><ul><li>Provides financial support to community literacy organizations </li></ul><ul><li>Participate in local charitable projects. </li></ul><ul><li>2004 EnviroStars Recognized Leader Award – for its community service and environmental activities </li></ul>
    13. 13. Starbucks’ Strategy <ul><li>Rapid store expansion strategy </li></ul><ul><ul><li>Domestic store expansion </li></ul></ul><ul><ul><li>International store expansion </li></ul></ul><ul><ul><li>Employee Training and Recognition </li></ul></ul><ul><ul><li>Real Estate, Store Design, Planning, and Construction </li></ul></ul><ul><ul><li>Store ambience </li></ul></ul><ul><li>Product Line </li></ul><ul><li>Coffee purchasing strategy </li></ul>
    14. 14. Starbucks’ Strategy <ul><li>Rapid store expansion strategy </li></ul><ul><li>Domestic store expansion </li></ul><ul><li>− A three-year expansion strategy </li></ul><ul><li>− “ Starbucks everywhere” approach </li></ul><ul><li>International store expansion </li></ul><ul><li>− Company-owned and company-operated stores or licensing </li></ul><ul><li>− Created a new subsidiary, Starbucks Coffee International </li></ul><ul><li>− Expanded its consumer products channel in South Pacific region </li></ul>
    15. 15. Starbucks’ Strategy <ul><li>Employee Training and Recognition </li></ul><ul><li>− Systems to recruit, hire and train baristas and store managers </li></ul><ul><li> screening </li></ul><ul><li> training programs </li></ul><ul><li> awards for partners </li></ul><ul><li>Real Estate, Store Design, Planning, and Construction </li></ul><ul><li>− A broad range of store formats (the right image and character) </li></ul><ul><li>− A “stores of the future” project team </li></ul><ul><li>− High-traffic, high-visibility store locations </li></ul><ul><li>− Control of average store opening costs </li></ul><ul><li>− Wi-Fi availability at stores </li></ul>
    16. 16. Starbucks’ Strategy <ul><li>Store ambience </li></ul><ul><li>− The concept of “everything matters” </li></ul><ul><li>− Assessment of standards </li></ul>
    17. 17. Starbucks’ Strategy <ul><li>Product Line </li></ul><ul><li>Wide range of products choices </li></ul><ul><li>Special product promotion </li></ul><ul><li>Selling music CDs </li></ul><ul><li>Joint ventures </li></ul><ul><li> PepsiCo </li></ul><ul><li> Dreyer’s Grand Ice Cream </li></ul><ul><li> Jim Beam Brands </li></ul><ul><li>Acquisitions </li></ul><ul><li> Hear Music </li></ul><ul><li> Ethos Water </li></ul><ul><li>Starbucks Cards </li></ul><ul><li>Partnership with Bank One </li></ul>
    18. 18. Starbucks’ Strategy <ul><li>Coffee purchasing strategy </li></ul><ul><li>Building relationship with growers and exporters, checking on agricultural conditions and crop yields, and searching out varieties and sources that would meet Starbucks’ standards. </li></ul><ul><li>Using fixed-price purchase commitment and purchasing coffee future contracts </li></ul><ul><li>Contributing to the sustainability of coffee growers and helping environment conservation </li></ul><ul><li>Purchasing and marketing Fair Trade Certified coffee </li></ul><ul><li>Promoting coffee cultivation methods that protected biodiversity and maintained a healthy environment </li></ul>
    19. 19. Industry and Competitive Analysis <ul><ul><li>Coffee Industry </li></ul></ul><ul><ul><li>C </li></ul></ul><ul><ul><li>Corporate Values and </li></ul></ul><ul><ul><li>Business Principles </li></ul></ul><ul><ul><li>Mission Statements </li></ul></ul><ul><ul><li>Corporate Social </li></ul></ul><ul><ul><li>Responsibility </li></ul></ul>
    20. 20. Industry and Competitive Analysis <ul><li>Coffee industry </li></ul><ul><ul><li>Coffee drinking trend </li></ul></ul><ul><ul><li>Coffee beans production </li></ul></ul><ul><li>Competitor analysis </li></ul><ul><ul><li>Future goals </li></ul></ul><ul><ul><li>Current strategy </li></ul></ul><ul><ul><li>Assumptions </li></ul></ul><ul><ul><li>Capabilities </li></ul></ul><ul><li>Generic competitive strategy </li></ul><ul><li>PEST analysis </li></ul><ul><li>Site 7S analysis </li></ul>
    21. 21. Industry and Competitive Analysis <ul><li>Coffee industry </li></ul><ul><li>Coffee drinking trend </li></ul><ul><li>− Coffee is the second most consumed drink after water. </li></ul><ul><li>− Americans substitute specialty coffee for alcohol. </li></ul><ul><li>− Coffee shops are a great place to meet people. </li></ul><ul><li>− Coffee is an affordable luxury. </li></ul><ul><li>− Consumers are more knowledgeable about coffee. </li></ul><ul><li>Coffee beans production </li></ul><ul><li>− In 1994, coffee was the second most traded commodity after Oil. </li></ul><ul><li>− There are two types of Coffee, namely “basic” and “specialty”. </li></ul>
    22. 22. Industry and Competitive Analysis <ul><li>Competitor analysis </li></ul><ul><li>2 Types of Competitor: </li></ul><ul><li>Coffee shops and restaurants </li></ul><ul><li>Nationwide coffee manufacturers (rival brands of specialty coffee) </li></ul>
    23. 23. Industry and Competitive Analysis <ul><li>Competitor analysis </li></ul><ul><li>Future goals </li></ul><ul><li>To grow bigger </li></ul><ul><li>To better position themselves as an alternative to Starbucks </li></ul><ul><li>Current strategy </li></ul><ul><li>Merger of local and regional chains of coffee shops etc. </li></ul><ul><li>Assumptions </li></ul><ul><li>− Competitors’ assumptions about themselves </li></ul><ul><li>− Competitors’ assumptions about the industry and other companies in it </li></ul>
    24. 24. Industry and Competitive Analysis <ul><li>Competitor analysis </li></ul><ul><li>Capabilities (areas of competitors’ strengths and weaknesses) </li></ul><ul><li>− Product </li></ul><ul><li>− Dealer/distribution </li></ul><ul><li>− Operations </li></ul><ul><li>− R & D </li></ul><ul><li>− Financial strength </li></ul><ul><li>− Organization & managerial ability </li></ul><ul><li>− Personnel turnover </li></ul>
    25. 25. Industry and Competitive Analysis Generic Competitive Strategy
    26. 26. Industry and Competitive Analysis <ul><li>Focused differentiation </li></ul><ul><li>Serve niche buyers better than rivals </li></ul><ul><li>Buyers have distinctive preferences, special requirements, or unique needs </li></ul><ul><li>Have unique capabilities to serve needs of target buyer segment </li></ul><ul><li>Big enough to be profitable and offers good growth potential </li></ul><ul><li>Costly or difficult for multi-segment competitors to meet specialized needs of niche members </li></ul><ul><li>Starbucks has resources and capabilities to effectively serve an attractive niche </li></ul><ul><li>Few other rivals are specializing in same niche </li></ul>
    27. 27. PEST Analysis <ul><li>Political Influences </li></ul><ul><li>− Relationships between U.S. and countries producing coffee beans </li></ul><ul><li>− Environmental regulations </li></ul><ul><li>− Industry-specific regulations </li></ul><ul><li>Economic Influences </li></ul><ul><li>− Demand for food and beverages </li></ul><ul><li>− Customers’ buying power </li></ul><ul><li>− Exchange rate & taxation </li></ul>
    28. 28. PEST Analysis <ul><li>Social Influences </li></ul><ul><li>− Trend </li></ul><ul><li>− Consumer preferences </li></ul><ul><li>− Changes in lifestyle and occupation </li></ul><ul><li>− Education </li></ul><ul><li>Technological Influences </li></ul><ul><li>− advances in manufacture </li></ul><ul><li>− biotech and agricultural development </li></ul><ul><li>− IT developments </li></ul>
    29. 29. Site 7S Model <ul><li>Strategy </li></ul><ul><li>Rapid store expansion strategy </li></ul><ul><li>Product Line </li></ul><ul><li>Coffee purchasing strategy </li></ul>
    30. 30. Site 7S Model Structure There are one store manager, one assistant manager, some shift supervisors and 16 partners/baristas
    31. 31. Site 7S Analysis <ul><li>Staffing </li></ul><ul><ul><li>Employee benefits package includes base salary, health care benefits, stock option plan, and </li></ul></ul><ul><ul><li>− 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. </li></ul></ul><ul><ul><li>− Employees trainings that include basic 24 hour-training, Star Skills, Coffee Master Program, Servant Leadership Workshop, Career Power and Career Power for Coaches Workshop. </li></ul></ul><ul><ul><li>− Awards for partners, which range from frequent awards to high-level cash awards. </li></ul></ul>
    32. 32. Site 7S Analysis <ul><li>Systems </li></ul><ul><li>− Centralized control over individual stores by headquarters </li></ul><ul><li>− Total Quality Management (i.e. Just-In-Time) </li></ul><ul><li>− Information system to support business operations. </li></ul><ul><li>− </li></ul>
    33. 33. Site 7S Analysis Skills − coffee making − customer service − sales techniques
    34. 34. Site 7S Model <ul><li>Style </li></ul><ul><ul><li>Increase motivation through reviews and raises. </li></ul></ul><ul><ul><li>Employees are allowed to make decisions and participate in </li></ul></ul>
    35. 35. Site 7S Model <ul><li>Shared Values </li></ul><ul><li>− Fun working environment </li></ul><ul><li>− Treat each other with respect and care </li></ul><ul><li>− D iversity is encouraged. </li></ul><ul><li>− Maintain highest quality standards for products </li></ul><ul><li>− S atisfy customers and compensate the unsatisfied ones. </li></ul><ul><li>− CSR . </li></ul><ul><li>− Respect employees by calling them partner. </li></ul><ul><li>− The importance of profitability for future success </li></ul>
    36. 36. Conclusion <ul><li>Focuser can defend against challengers via superior ability to serve niche members </li></ul>
    37. 37. Recommendation <ul><li>Focuser can defend against challengers via superior ability to serve niche members </li></ul>
    38. 38. Starbucks Corporate Strategy