Starbucks

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. 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

3. Presentation Outline
 About Starbucks
 Overview
 Timeline
 Corporate Values and
Business Principles
 Mission Statements
 Corporate Social
Responsibility
 Starbucks’ Strategy
 Store expansion strategy
 Product line
 Coffee purchasing strategy
 Industry and Competitive
Analysis
● Coffee industry
● Competitor analysis
● Generic competitive strategy
● PEST analysis
● Site 7-S analysis
 Conclusion
 Recommendation

4. Presentation Outline
 About Starbucks
 Starbucks’ Strategy
 Industry and Competitive Analysis
 Conclusion
 Recommendation

5. About Starbucks
● Overview
● Timeline
● Corporate Values and
Business Principles
● Mission Statements
● Corporate Social
Responsibility

6.  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)
Overview

7. 1971 – Starbucks Coffee, Tea, and Spice store (coffee bean roasting)
opened in Seattle’s 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

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

9. 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

10. 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.”

11. 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.

12. 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

13. 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 Line
 Coffee purchasing strategy

14. 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

15. 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

16. Starbucks’ Strategy
• Store ambience
− The concept of “everything matters”
− Assessment of standards

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

18. 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

19. Industry and Competitive
Analysis
● Coffee Industry
● C
● Corporate Values and
Business Principles
● Mission Statements
● Corporate Social
Responsibility

20. 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

21. 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”.

22. Industry and Competitive
Analysis
Competitor analysis
2 Types of Competitor:
 Coffee shops and restaurants
 Nationwide coffee manufacturers (rival brands
of specialty coffee)

23. 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

24. 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

25. Industry and Competitive
Analysis
Generic Competitive Strategy

26. 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

27. 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

28. PEST Analysis
Social Influences
− Trend
− Consumer preferences
− Changes in lifestyle and occupation
− Education
Technological Influences
− advances in manufacture
− biotech and agricultural development
− IT developments

29. Site 7S Model
Strategy
Rapid store expansion strategy
Product Line
Coffee purchasing strategy

30. Site 7S Model
Structure
There are one store
manager, one assistant
manager, some shift
supervisors and 16
partners/baristas
B a ris ta s B a ris ta s B a ris ta s
S h ift S u p e rv is o rs
A s s is ta n t M a n a g e r
S to re M a n a g e r

31. 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 W
orkshop, Career
Power and Career Power for Coaches W
orkshop.
− Awards for partners, which range from frequent awards to high-
level cash awards.

32. 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.
−

33. Site 7S Analysis
Skills
− coffee making
− customer service
− sales techniques

34. Site 7S Model
Style
● Increase motivation through reviews and raises.
● Employees are allowed to make decisions and participate in

35. 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

36. Conclusion
 Focuser can defend against challengers via
superior ability to serve niche members

37. Recommendation
 Focuser can defend against challengers via
superior ability to serve niche members

38. Starbucks Corporate Strategy