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Starbucks Case Study, SWOT, Internal and External Analysis

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UPM BBA
2015
Subject : Strategic Management
Result for this subject : A-

Published in: Education
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Starbucks Case Study, SWOT, Internal and External Analysis

  1. 1. MGM 4139 STRATEGIC MANAGEMENT CASE STUDY by : Anaseri Zulkifli EX2833 Hafizullah Mohd Amin EX2906 Michelle Lim Li Yoke EX2885 Mohd Osman Mohd Hassan EX2894 Mohd Johan Khair Azmi EX2889 Rashidi Jaffri Jaafar EX2815
  2. 2. Contents • Introduction • Vision & Mission Statement • Analysis & Matrix • Internal Analysis • External Analysis • SWOT Matrix • BCG Matrix • Recommendation • Financial Analysis • EPS – EBIT Analysis • Ratio Analysis • Conclusion • Reference
  3. 3. STARBUCKS Journey Founded as Seattle coffee bean roaster and retailer 1971 1992 The word “Coffee, Tea and Spices” were under the word “Starbucks”. 1987 The original owners sold the Starbucks chain to Howard Schultz The word “Coffee, Tea and Spices” were removed the word “Starbucks”. They made the mermaid in the center larger showing just her face and fins Starbucks changed its logo for their 40th anniversary. 2011 IPO. 140 outlets, with revenue $73.5m 19991996 First store in Japan 20081989 46 stores, roasting over 2,000,000 pounds of coffee. Acquires Tazo 2003 Acquires Seattle's Best Coffee and Torrefazione Italia Purchased Clover Brewing System 2012 Acquires Teavana 2014 21,160 outlets in 63 countries Revenue $15b 182k employees
  4. 4. Vision “Starbucks is committed to ethically sourcing and roasting the highest quality Arabica coffee in the world. With stores around the globe, we are the premier roaster and retailer of specialty coffee in the world”
  5. 5. STARBUCKS Internal Analysis 1. Huge market expansion to China, Brazil, India and Russia Weaknesses 0.15 4 0.60 0.05 4 0.20 0.05 3 0.15 0.05 3 0.15 0.06 4 0.24 0.03 4 0.12 0.05 4 0.20 0.03 3 0.09 0.05 4 0.20 0.03 3 0.09 0.08 1 0.08 0.02 2 0.04 0.07 1 0.07 0.03 2 0.06 0.03 2 0.06 0.03 2 0.06 0.05 1 0.05 0.05 2 0.10 0.03 1 0.03 0.06 1 0.06 2.04 0.61 4. Too dependent on the main competitive advantage 5. Strong presence in US but not in other countries 6. Reputation of product dev. and creativity is vulnerable 7. Customers not willing to wait for long queue at store 8. Customers not willing to wait for long queue at store 9. Failure to understand what are the customers' wants and needs 10. Merchandise items sold at exorbitant pricing Strengths W R S W R S 4. Starbucks has monopolistic advantages over its competitors 5. Acquired Ethos healthy water for 8million in 2005 6. Acquired Tao in 1999 at 8.1million 7. Owns the trademark for Frappuccino 8. Aggressive Marketing Team for promotions 9. Great loyalty card/cash card system 10. Great designs for merchandise product line 2. Provide a great work environment 3. Apply high standards of excellence in services 1. High pricing for coffee, cappuccino and latte 2. Less advertising campaign for its products 3. Products are not available in all supermarkets worldwide
  6. 6. Strengths 2.04 Weaknesses 0.61 TOTAL IFE = 2.65
  7. 7. STARBUCKS External Analysis 1. Globalization makes it easy to enter international market Threads 0.01 4 0.04 0.05 3 0.15 0.05 2 0.10 0.05 3 0.15 0.05 3 0.15 0.05 4 0.20 0.03 3 0.08 0.05 3 0.15 0.03 2 0.05 0.03 2 0.05 0.01 3 0.03 0.15 3 0.45 0.05 2 0.10 0.05 2 0.10 0.05 3 0.15 0.03 3 0.08 0.03 2 0.05 0.03 3 0.08 0.03 2 0.05 0.03 3 0.08 1.48 1.42 4. Increasing competitors in the market 5. Competitors start to market their products in hypermarkets 6. Increase in supply chain cost due to competitive market 7. Brand boycott in Malaysia due to conflicts between country 8. Global expansion barriers i.e.: India 9. Environmental: Green techniques are more costly 10. Social-Cultural issue: Food served contains too much carbohydrates Opportunities W R S W R S 4. Demand for healthy and non- chemical F&B products 5. Go Green marketing campaign attracted the public 6. Coffee imports are duty-free & quota for purchases is unlimited 7. Coffee is a daily routine for a lot of working adults 8. Social Media can be a useful tool for marketing 9. Demand for light food and coffee over meetings with client 10. Demand for packed instant coffee 2. People are looking for free internet connection 3. Express food are getting popular to save time 1. ↑inflation rates creates a demand in lower priced products 2. Many companies are pricing their products cheaper 3. Increase in hypermarkets and economical supermarkets
  8. 8. Strengths 2.04 Weaknesses 0.61 TOTAL IFE = 2.65 Opportunities 1.48 Threads 1.42 TOTAL EFE = 2.90
  9. 9. TOTAL IFE = 2.65 TOTAL EFE = 2.90 Threads 1.42 Opportunities 1.48 Strengths 2.04 Weaknesses 0.61 STARBUCKS Internal – External Matrix Strong 3.0 to 4.0 Average 2.0 to 2.99 Weak 1.0 to 1.99 High 3.0 to 4.0 Medium 2.0 to 2.99 Low 1.0 to 1.99 I II III IV V VI VII VIII IX IFE = 2.65 EFE = 2.90 Grow & Build • Backward, Forward, or Horizontal Integration • Market Penetration • Market Development • Product Development Hold & Maintain • Market Penetration • Product Development Harvest or Divest • Retrenchment • DivestitureHold and maintain strategy Focus on increasing market penetration and product development The tactical strategies should focus on market penetration and product development.
  10. 10. STARBUCKS SWOT Analysis Strength Weakness Opportunity Thread • No. 1 brand in coffeehouse segment. • Strong brand image • Largest coffeehouse chain in the world • Competitors price is the major influence over firm’s profit • Product pricing • Negative publicity • To extend supplier network • Increase product offerings • Expansion of retail operations • Rising coffee beans and dairy products • Increased competition from local cafes • Supply disruptions • Product boycott S W O T
  11. 11. STARBUCKS SWOT Matrix SO Strategies • Add a few new in-store (S2, O1) • Offer a new product instead of coffee. (S3, O3, O2) • To carry out improvements and diversity on existing products (S1, S3, O2) WO Strategies • Purchase land to build new store (W1, O3) • Reduce price (W2, W1, O3) • Do a promotion (W2, O2) • Do some charity work to avoid customer negative thinking (W3, O3) ST Strategies • Build a coffee plantation (S3, T1, T3) • Maintain and diversify the product. (S1, T2) • Show support to a number of global issues such as creating a campaign on social (S2, T3) WT Strategies • Make sure not biased to anyone. (W3, T3) • Do not be overstaffed (W1, T2) Strength Weakness OpportunityThread
  12. 12. STARBUCKS BCG Matrix High High Low Low IndustryGrowthRate Relative Market Share star dog cash cow ?
  13. 13. Recommendation • Starbucks should reduce their price by producing a new product of coffee using cheaper beans. • Special discounts promotions to increase the sales. This is also to face competition from nationwide coffee manufactures. • Starbucks can effectively pursue Focus-Based Strategy • Advertisement can be developed through internet, give brochures, do road shows
  14. 14. EPS Analysis Earnings Per Share (EPS) Earnings Per Share : Net Income – Dividend on Preferred Stock (EPS) Weighted Average Common Shares Outstanding • Also called net income per share • Market prospect ratio that measures the amount of net income earned per share of stock outstanding • A good measure of profitability • Gives a view of the comparative earnings or earnings power of the firm.
  15. 15. EPS Analysis Earnings Per Share (EPS) $0.87 $0.43 $0.52 $1.24 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 2007 2008 2009 2010 EPS
  16. 16. EBIT Analysis Earnings Before Interest & Taxes (EBIT) • Also referred to as "operating earnings", "operating profit" or "operating income“ • Measures the profitability of a company without taking into account its cost of capital or tax implications. • Important because it is an indirect measure of efficiency • Higher the operating income, the more profitable a company's core business is EBIT = Revenue – COGS – Operating Expenses
  17. 17. EBIT Analysis Earnings Before Interest & Taxes (EBIT) $1,053.90 $503.90 $562.00 $1,419.40 $- $200.00 $400.00 $600.00 $800.00 $1,000.00 $1,200.00 $1,400.00 $1,600.00 2007 2008 2009 2010 ($'million) EBIT
  18. 18. Ratio Analysis Liquidity Ratio • The higher the better • 2008 : 0.8 increased to 2010 : 1.5 = CR • 2009 : 0.6 increased to 2010 : 1.2 = QR • Starbucks has good ability to clear of its current liability.
  19. 19. Ratio Analysis Leverage Ratio • The lower the better • 2008 : 0.2 decreased to 2010 :0.1 • Starbucks relies less on debt financing. • Good internal or capital financing capabilities of the company.
  20. 20. Ratio Analysis Activity Ratio • The higher the better • ITR, TATR, ACPR show declining pattern • Slow movement in business activities. • ARTR is increasing , good payment from debtors.
  21. 21. Ratio Analysis Profitability Ratio • The higher the better • Very good indication. Good sales and return ratio towards all stakeholders. • Example, Net Income increased by 200% in 2009-2010. • Good strategies, operation, asset managements, and sales promotions.
  22. 22. Conclusion • Overall Starbucks has maintained a competitive advantage since creating its original blue ocean of bringing quality, bistro-style coffee choices to the masses. • In order to stay current it will need to focus on its core competencies. • To remain competitive, they need to create new value innovation. • Rather than creating more new products, we think their strength lies in their brand and by enhancing the connection to their loyal customers
  23. 23. Conclusion • Overall Starbucks has maintained a competitive advantage since creating its original blue ocean of bringing quality, bistro-style coffee choices to the masses. • In order to stay current it will need to focus on its core competencies. • To remain competitive, they need to create new value innovation. • Rather than creating more new products, we think their strength lies in their brand and by enhancing the connection to their loyal customers Thank You

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