Starbucks has grown from a single coffee shop in 1971 to over 21,000 stores globally. The case study analyzes Starbucks' strategy and performance. It finds that Starbucks has strong brand image and market share but also faces threats from increasing competition and rising costs. The recommendation is for Starbucks to reduce prices through cheaper coffee beans and special promotions to boost sales while pursuing a focus-based strategy with advertising on the internet and events. Financial analysis shows growing earnings per share and operating income from 2007-2010, with good liquidity and profitability ratios, though activity ratios indicate slowing business activities.

2. 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

3. 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

4. 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

5. 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”

7. 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

8. Strengths
2.04
Weaknesses
0.61
TOTAL IFE = 2.65

9. 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

10. Strengths
2.04
Weaknesses
0.61
TOTAL IFE = 2.65
Opportunities
1.48
Threads
1.42
TOTAL EFE = 2.90

11. 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.

12. 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

13. 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

14. STARBUCKS
BCG Matrix
High
High
Low
Low
IndustryGrowthRate
Relative Market Share
star
dog cash cow
?

15. 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

16. 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.

17. 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

18. 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

19. 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

20. 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.

21. 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.

22. 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.

23. 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.

24. 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

25. 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