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Starbucks Strategy

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A presentation compiled in December, 2010 reporting on a complete strategic profile of Starbucks (including strategic recommendations).

Starbucks Strategy

  1. 1. Starbucks Strategic Context Presentation Group 4; 2:00 p.m.Justin Lenhert, Brandon Terrebonne, T.J. Owen, Matt Bruns, Tim Johnson, Ben Carrier, Brent Reilly 1  
  2. 2. Table of Contents1. Strategic History.....................................Slides 3-82. Strategic Group Analysis........................Slides 9-123. Five Forces Analysis................................Slides 13-234. Macroenvironmental Analysis...............Slides 24-30 2  
  3. 3. Table of Contents1. Strategic History.....................................Slides 3-82. Strategic Group Analysis........................Slides 9-123. Five Forces Analysis................................Slides 13-234. Macroenvironmental Analysis...............Slides 24-30 3  
  4. 4. Strategic History of StarbucksBags  of  Beans:     The  Tall  Age:     The  Grande  Age:     The  VenM  Age:    1971  –  1987   1988  –  1995   1996  –  2002   2003  –  2010  Founded  in  Sea7le  as  a  premium   Schultz  gained  popularity   Starbucks  expands  with  many   Starbucks  conMnues  to  expand  roasted  bean  retailer,  then   by  giving  part-­‐Mme   new  products  such  as   rapidly  in  new  internaMonal  Howard  Schultz  entered  the   employees  full  benefits.   frappuccino,  ice  cream,  and  Tazo   markets.  Sociocultural  picture  and  started  the  idea  of   Starbucks  went  public  as   Tea.  Store  openings  increase   undertakings  increase,  as  does  Starbucks  as  a  coffee  retailer.   SBUX.   exponenMally  and   their  stock  value.   internaMonally.      
  5. 5. Bags of Beans: 1971-1987 AcquisiLons  and  AddiLons  Intended  Strategy:    To  sell  specially  roasted,  quality   Corporate  Expansion  coffee  beans  to  individual  consumers.   Sociocultural  Events  Emergent  Strategy:    With  Schultz’s   Total  Store  Count  persistence,  Starbucks   First  Mover  Advantages:  begins  brewing  and  selling   Starbucks’  use  of  the  highest  coffee  to  consumers.  Also,   quality  roasted  beans.  Schultz’s  bean  markeMng  is   Starbucks  was  one  of  the  first  expanded.   Italian  Café  style  coffee  retailers  in   the  U.S.     1971 1982 1985 1987:     Howard  founds  Il  Giornale,  offering  brewed   Total  Stores:  17   Starbucks  opens  first   Howard  Schultz  joins  Starbucks  as  director  of  retail   coffee  and  espresso beverages  made  from   store    in  Sea4le’s  Pike   operaMons  and markeMng.   Starbucks®  coffee  beans.   Place  Market. 1984 1987 1972 Howard  convinces  the  founders  of  Starbucks  to  test   Il  Giornale  acquires  Starbucks  assets  with  the   A  Second  Starbucks     the coffeehouse  concept  ,  first Starbucks®  Caffè  La7e   backing  of  local investors  and  changes  its  name   opens  in  Sea7le is  served.   to  Starbucks  CorporaMon.    
  6. 6. The Tall Age: 1988-1995 Super  Ordinate  Goal:     Intended  Strategy:   Establish  Starbucks  as  the  premier  purveyor   Focus  on  employee  saMsfacMon  through   of  the  finest  coffee  in  the  world  while   benefits  and  stock  opMons  to  reduce   maintaining  our  uncompromising  principles   turnover,  thus  saving  money  in  the  long  run.   while  we  grow.   Emergent  Strategy:   With  gaining  popularity,  Starbucks  begins   to  spread  rapidly  across  the  U.S.  and  North   America,  although  Schultz  originally   emphasized  slow  expansion.   First  Mover  Advantages:   Schultz  provided  health  benefits  and   private  stock  opMons  to  full  and  part-­‐Mme   employees  alike.     1990 Starbucks  expands   19951988 headquarters    in   1992 1993 Begins  serving  Frappuccino®  Offers  full  health  benefits     Sea7le. Completes  iniLal  public  offering  (IPO),   Opens  roasLng  plant     blended  beverages. with  stock  being traded  on  Nasdaq  under   in  Kent,  Wash. Introduces  Starbucks®  super-­‐to  eligible  full-­‐  and  part-­‐ 1991 the  trading  symbol “SBUX.” premium  ice  cream.Lme  employees. Becomes  the  first  privately   1993  1989 owned  U.S.  company  to  offer  a   Announces  first  two-­‐for-­‐one  stock   1993   1995  Total  stores:  55 stock opLon  program  that   split. Total  stores:  272   Total  stores:  677 includes  part-­‐Mme  employees.
  7. 7. The Grande Age: 1996-2002 First  Mover   Intended  Strategy:     Advantages:   Enter  new  markets,  slowly   Bo7led  Frappuccino   expand  and  dominate,  then   entered  the  market,   move  on  to  a  new  market.   Starbucks  entered   Emergent  Strategy:     the  music  industry   During  this  period,  Starbucks   with  Hear  Music   was  expanding  way  faster  than   acquisiMon.   intended  and  into  more   markets.  1996 2000Begins  selling  bo4led  Frappuccino®  through   1998 1999 Introduces  coffee  category  that  exhibits  a  partnership  with  Pepsi-­‐Cola. Acquires  Tazo,  a  tea  company  based  in   Partners  with  ConservaLon   shade  grown,  organic  and Fair  Trade  Opens  stores  in:  Japan  (first  store  outside  of   Portland,  Oregon InternaLonal  to  promote   CerMfied™  selecMons.North  America)  and Singapore. sustainable coffee-­‐growing   Forms  Urban  Coffee  OpportuniLes,  a  joint   venture  with  Earvin “Magic”  Johnson’s   pracMces. 2002 Total  stores:  1,015 Starbucks  enters  into  licensing   Johnson  Development  Corp.,  to  develop Starbucks  stores  in  diverse,  urban  and   agreements  with  naLonal  Fair Trade   1997 suburban  communiMes. Acquires  Hear  Music,  a  San   organizaLons  to  sell  Fair  Trade   Establishes  The  Starbucks  FoundaLon,   Francisco–based  music  company.   CerLfied™  coffee  in  the countries   benefiMng  local  literacy programs  in   Extends  the  Starbucks  brand  into  grocery   where  Starbucks  does  business. communiMes  where  Starbucks  has   channels   through  licensing  agreement   with  Krad  Foods,  Inc. Total  stores:  5,886 coffeehouses.
  8. 8. The Venti Age: 2003-2010Intended  Strategy:     First  Mover  ConMnue  to  expand  while  also   Advantages:    building  their  image  of  social   Starbucks’  responsibility.   Facebook  fan   page  and  Twi7er,  Emergent  Strategy:    Though  sociocultural  efforts   MyStarbucksIdea.were  strong,  their  customer   com,  VIA  Ready  service  was  lacking,  which  led  to   Brew  Coffee.  Schultz  coming  back  on  board  as  CEO  to  reinforce  this  area.  2003Acquires  Sea4le  Coffee  Company,  which  includes  Sea4le’s  Best 2008 2009Coffee  and  Torrefazione  Italia   Chairman  Howard  Schultz  returns  as  chief  execuLve   Launches  Starbucks  VIA™  Ready  coffee  brands. 2005 officer. Announces  a  renewed  focus  on  customer   Brew  Coffee. Acquires  Ethos  Water.     experience  and innovaLon. Opens  second  Starbucks  Farmer  2004 Launches  MyStarbucksIdea.com,  Starbucks  first  online   Support  Center  in  Kigali,  Rwanda.Opens  first  Starbucks  Farmer   2006 community. Starbucks  helps  save  lives  in  Africa  Support  Center  in  San  Jose,   Launches  the  industry’s  first   Announces  Starbucks™  Shared  Planet™,  the  company’s   through  their  partnership  with (RED)Costa Rica. paper  beverage  cup  containing   longterm commitment  to  conducMng  business   ™.   postconsumer recycled  fiber. responsibly.   2007 Total  stores:  8,569 Total  stores:  15,011 Total  stores:  16,680 Total  stores:  16,635
  9. 9. Table of Contents1. Strategic History.....................................Slides 3-82. Strategic Group Analysis........................Slides 9-123. Five Forces Analysis................................Slides 13-234. Macroenvironmental Analysis...............Slides 24-30 9  
  10. 10.   Strategic  Group  Analysis  of  the    U.S.  Retail  Specialty  Non-­‐Alcoholic     Coffee  Industry  
  11. 11. Starbucks Aggregate Micro Sub-Industries  
  12. 12. Threats  and  OpportuniMes     Derived  from  Strategic  Group  Analysis   •  Main  OpportuniLes   •  Main  Threats    Increasing  popularity  of  energy  drinks/   Fast  food  and  on  the  go  retailers  trying   shots   to  accommodate  for  the  lifestyle  type    Increasing  demand  for  health  conscious   consumer   food/beverages     High  compeMMon  weakens  first  mover    NegaMve  publicity  for  sol  drinks  as  an   benefits  on  innovaMve  store  concepts   unhealthy  drink  choice       Increasing  threat  from  tea  stores    Increasing  popularity  of  smoothies       Economies  of  scale  facilitate  good  quality   coffee  availability   12  
  13. 13. Table of Contents1. Strategic History.....................................Slides 3-82. Strategic Group Analysis........................Slides 9-123. Five Forces Analysis................................Slides 13-234. Macroenvironmental Analysis...............Slides 24-30 13  
  14. 14. Five  Forces  Analysis  of  the  Lifestyle  Strategic  Group  in  the  U.S.   Specialty  Non-­‐Alcoholic  Beverage  Industry   Threat  of   SubsMtute   Products   Rivalry   Bargaining   Threat  of   Among   Power  of   New   CompeMng   Buyers   Entrants   Firms   Bargaining   Power  of   Suppliers   14  
  15. 15. Threat  of  SubsMtute  Products   Determinant   Strength  of  Determinant   Strength  of  Force  Amount  of  SubsLtutable  Products   High   High  Price-­‐Performance  Trade-­‐Off     Moderate   Moderate  Profit  Level  of  Industry   Moderately  High   Moderately  High  Switching  Costs   Low   Low  Fast  Food  Coffee  •  Price-­‐Performance  Trade-­‐Off   Low   Low  •  Profit  of  the  SubsMtute   Moderate   Moderate  •  Switching  Costs   Low   High  •  Overall   Moderately  Low   Moderate  On  The  Go  Coffee  •  Price-­‐Performance  Trade-­‐Off   Low   Low  •  Profit  of  the  SubsMtute   Moderate   Moderate  •  Switching  Costs   Low   High  •  Overall   Moderately  Low   Moderate  Overall  Strength:   High   Overall  high  strength  of  threat  of  subsMtute  products    contributes  to  low   industry  profitability.   15  
  16. 16. Threat  of  New  Entrants   Strength  of   Determinant   Sub-­‐Determinate   Strength  of  Force   Determinate  Switching  Costs   -­‐   Low   Low   FuncLonal  Differences   Low  Product  DifferenLaLon   Moderate   Psychological  Differences   Moderately  High  Capital  Requirements   -­‐   Moderately  High   Moderately  High   Access  to  DistribuLon  Channels   High  Access  to  CriLcal  Resources   High   Access  to  Necessary  Inputs   High   History  of  Firms  Lashing  Out   Moderate   Limited  Resources   Moderately  High  Expected  RetaliaLon   Moderate   Likeliness  to  Cut  Prices   Low   Growth  in  Focal  Industry   Moderate  Economies  of  Scale   -­‐   Moderately  High   Moderately  High   Government  RegulaLon  of  Entry   Low   Onerous  RegulaLon  of  Focal  Government  Policy   Low   Moderately  Low   Industry   Patent  ProtecLon  for  ExisLng  Firms   Moderate  Overall  Strength:   Moderate   Overall  moderate  strength  of  threat  of  new  entrants  contributes  to   moderately  low  industry  profitability.   16  
  17. 17. Bargaining  Power  of  Suppliers   Determinant   Strength  of  Determinate   Strength  of  Force  ConcentraLon  of  Supply  Industry   High   High  relaLve  to  Focal  Industry  Switching  Costs   High   High  SubsLtute  Products   Low   Low  Importance  of  Product  to  Buyer   High   High  Labor  Force   Moderately  High   Moderately  High  Forward  IntegraLon   Low   Low  Overall  Strength:   Moderately  High   Overall  moderately  high  strength  of  supplier  bargaining  power  contributes  to   moderately  low  industry  profitability.   17  
  18. 18. Bargaining  Power  of  Buyers   Determinant   Strength  of  Determinant   Strength  of  Force  ConcentraLon  of  Buying  Industry   Moderately  High   Moderately  High  relaLve  to  Focal  Industry  Volume  of  Purchases   Low   Low  Switching  Costs   Moderately  Low   Moderately  High  Product  DifferenLaLon   Moderate   Moderate  Price  SensiLvity   Moderate   Moderate  Backward  IntegraLon   Moderately  Low   Moderately  Low  Overall  Strength:   Moderate   Overall  moderate  strength  of  buyer  bargaining  power  contributes  to   moderate  industry  profitability.   18  
  19. 19. Rivalry  Among  CompeMng  Firms   Strength  of   Determinant   Sub-­‐Determinant   Strength  of  Force   Determinate  Industry  Growth   -­‐   Moderate   Moderate  CompeLtor  Balance   -­‐   Moderate   Moderate  Fixed  Costs   -­‐   High   High  Switching  Costs   -­‐   Moderate   Moderate   FuncLonal  Differences   Low  Product  DifferenLaLon   Moderate   Brand/Psychological  Differences   High   Economic  RaLonale   Moderate  Exit  Barriers   Moderately  High   Psychological  RaLonale   Moderately  High  Firm  ConcentraLon   -­‐   Low   Low  Overall  Strength:   Moderate   Overall  moderate  strength  of  compeMng  firm  rivalry  contributes  to   moderate  industry  profitability.   19  
  20. 20. Five  Forces  Analysis  of  the  Lifestyle  Strategic  Group  in  the  U.S.   Specialty  Non-­‐Alcoholic  Beverage  Industry   High       Threat  of   Aggregate  Industry  Analysis                              =  Strength  of  Force   SubsMtute     •  Strength  of  Forces:  Moderately  High                             Products   •  Profitability  of  Industry:  Moderately  Low   Moderate   Moderate   Rivalry   Bargaining   Threat  of   Among   Power  of   New   CompeMng   Buyers   Entrants   Firms   Moderate   Bargaining   Power  of   Suppliers   Moderately  High   20  
  21. 21. 21  
  22. 22. Sources  of  Firm  Profitability  Firm  Profit   Excellent  SF  &  SI   Profit  for  the  Average   Firm  in  Industry  2   Poor  SF  &  SI   U.S.  Specialty  Non-­‐Alcoholic  Beverage  Industry     Excellent  SF  &  SI   Profit  for  the  Average     Firm  in  Industry  1   Poor  SF  &  SI   Industry  1   Industry  2  
  23. 23. Threats  and  OpportuniMes  Derived  from  Porters   5  Forces   •  Main  OpportuniLes   •  Main  Threats    Decreasing  power  of  suppliers  based  on     CompeLLon  within  the  industry  rising   the  knowledge  of  an  Arabica  coffee   due  to  new  entrants   bean  surplus     Coffee  shops  have  low  start  up  costs    12  countries  have  higher  coffee     Increasing  threat  in  instant  coffee   consumpMon  than  the  US     Power  of  buyers  increasing  since  home    Power  of  buyer  shil  as  longer  working   brewed  Robusta  coffee  bean  prices  are   hours  make  caffeinated  products  more   decreasing   necessary         Increased  availability  of  household    Increase  in  coffee  commodity  prices   espresso  machines   reflect  an  increasing  demand  for  the   coffee  industry    as  a  whole   23  
  24. 24. Table of Contents1. Strategic History.....................................Slides 3-82. Strategic Group Analysis........................Slides 9-123. Five Forces Analysis................................Slides 13-234. Macroenvironmental Analysis...............Slides 24-30 24  
  25. 25. Demographic Main Opportunities Main Threats  Millennials/Gen-Y leading   “Baby Boomers” getting older and demographic spending on leaving workforce restaurant food and drinks   Birthrate is declining and people are  Population expected to grow to having fewer kids. over 9 billion by 2050   25  
  26. 26. Technology Main Opportunities Main Threats  Expansion of broadband and   Expansion of internet creates wireless technology increased corporate visibility  Expansion of mobile internet technology   26  
  27. 27. Sociocultural Main Opportunities Main Threats  “Green Movement” and   Push to support local businesses Sustainability   Increase in visibility and critical view  Shift towards more Corporate Social of corporations Responsibility   Consumers become more price  Customers are demanding faster and value conscious service, faster communication, and a faster way of life 27  
  28. 28. Economic Main Opportunities Main Threats  Overall savings rate falling,   Coffee and Diary prices expected particularly in younger generations to rise around 20% in 2010 and 2011   Ongoing high unemployment in the United States 28  
  29. 29. Global Main Opportunities Main Threats  Taking advantage of Asian markets   Hundreds of millions of people and services world-wide rely on the coffee  Break down of international trade industry for jobs barriers   Break down of international trade  Global education and work skills barriers improving  Hundreds of millions of people world-wide rely on the coffee industry for jobs  Global education and work skills improving  Increasing consumption of coffee around the world, particularly in China 29  
  30. 30. Political/Legal Main Opportunities Main Threats  Chinese tariffs cut 9.4% overall in   Rise of Fair Trade Movements the past decade   Political instability in Columbia and Central American counties 30  
  31. 31. Table of Contents1. Strategic History.....................................Slides 3-82. Strategic Group Analysis........................Slides 9-123. Five Forces Analysis................................Slides 13-234. Macroenvironmental Analysis...............Slides 24-30 31  
  32. 32. References  •  Arthur  A  Thomson,  Amit  J.  Shah,  Thomas  F.  Hawk.  “Starbucks  Global  Quest  in  2006:  Is  the    Best  Yet  to  Come?”  Craling  and  ExecuMng  Stratefy:  The  Quest  for  CompeMMve    Advantage  Concepts  and  Cases  15th  EdiMon.  Arthur  A  Thomson  Jr,  AJ  Strickland  III,    John  E  Gamble.  p.  C-­‐468  to  C-­‐495  •  Beinhocker,  Eric,  Ian  Davis,  and  Lenny  Mendonca.  "The  10  Trends  You  Have  to  Watch."    Harvard  Business  Review  87.7/8  (2009):  55-­‐60.  Business  Source  Premier.  EBSCO.    Fri.    24  Sept.  2010.  •  "Caribou  Coffee  Company  Overview."  Caribou  Coffee.  Web.  24  Sept.  2010.    <h7p://phx.corporate-­‐ir.net/phoenix.zhtml?c=192910&p=irol-­‐irhome>.  •  "FORTUNE  Global  500  2006:  Top  Performers,  Top  Industries,  Return  on  Assets."  Business,    Financial,  Personal  Finance  News  -­‐  CNNMoney.com.  Web.  24  Sept.  2010.    <h7p://money.cnn.com/magazines/fortune/global500/2006/performers/industries/return_  assets/index.html>  •  "Global  Demographic  Trends:  Key  ImplicaMons.  (cover  story)."  Emerging  Markets  Monitor  11.39    (2006):  1-­‐3.  Business  Source  Premier.  EBSCO.  Fri.  24  Sept.  2010.  • "Lakota  Coffee."  Columbia  Missouri  Coffee.  Web.  Sept.  2010.    <h7p://www.lakotacoffee.com/>.   32  
  33. 33.       References  Márquez,  Carlos.  "Global  trends  that  will  impact  our  way  of  the  future."  Caribbean  Business    37.(2009):  11-­‐20.  Business  Source  Premier.  EBSCO.  Fri.  24  Sept.  2010.    S&P  Industry  Surveys:  Foods  &  Nonalcoholic  Beverages:  (Including    Agribusiness)Tom  Graves,  Esther  Y.  Kwon.  June  10,  2010.Net  Advantage.      Fri.  24  Sept.  2010    "Robusta  Coffee  Price  Chart,  2000-­‐2010."  Rainforest  -­‐  Mongabay.com.  Web.  24  Sept.  2010.    <h7p://www.mongabay.com/images/commodiMes/charts/robusta_coffee.html>.    S&P  Industry  Surveys:  Restaurants:  Mark  Basham.  September  2,  2010.  Net  Advantage.      Fri.  24  Sept.  2010    Schilling,  Melissa  A.  "Starbucks:  Taking  the  Espresso  Lane  to  Profits."  Strategic  Management:    An  Integrated  Approach.  3rd  ed.  Charles  Hill,  1995.  C19-­‐30.  Print.      "Starbucks."  Starbucks  Coffee  Company.  Web.  24  Sept.  2010.    <h7p://www.starbucks.com>.    “Starbucks  Coffee  Company  Timeline.”  Starbucks  Novasphere.  Web.  24  Sept.  2010.    <h7p://www.starbucks.co.nz/index.cfm?contentNodeID=261>.       33  
  34. 34. References    "Starbucks  Profile."  ZenoBank.com.  Web.  24  Sept.  2010.    <h7p://zenobank.com/index.php?symbol=SBUX&page=quotesearch>.      "Tea  ConsumpMon  StaMsMcs  -­‐  Countries  Compared  -­‐  NaMonMaster."  NaHonMaster  -­‐  World    StaHsHcs,  Country  Comparisons.  Web.  24  Sept.  2010.    <h7p://www.naMonmaster.com/graph/foo_tea_con-­‐food-­‐tea-­‐consumpMon>.    Web  Staff.  "ENERGY  DRINKS:  Health  Officials  See  Rise  in  Energy  Drink  ConsumpMon  among    Young  Adults  -­‐  KSTU."  Fox13now.com  Salt  Lake  City  -­‐  KSTU.  17  Aug.  2010.  Web.    24  Sept.  2010.  <h7p://www.fox13now.com/news/kstu-­‐energy-­‐drinks-­‐warning-­‐utah-­‐  health,0,4453498.story>.    "YouTube  -­‐  Man  Drinking  Fat.  NYC  Health  AnM-­‐Soda  Ad.  Are  You  Pouring  on  the  Pounds?"    YouTube  -­‐  Broadcast  Yourself.  Web.  24  Sept.  2010.    <h7p://www.youtube.com/watch?v=-­‐F4t8zL6F0c>.     34  
  35. 35. StarbucksStrategy Formulation, Implementation, Fit and Performance Group 4; 2:00 p.m.Justin Lenhert, Brandon Terrebonne, T.J. Owen, Matt Bruns, Tim Johnson, Ben Carrier, Brent Reilly 35  
  36. 36. Table of Contents•  Strategy  FormulaMon   •  SOGs:  Vision,  Mission,  Purpose,  Goals,  and  Mantra   •  Strategy  as  PosiMon:  Business  Level  Strategy  •  Strategy  ImplementaMon   •  Skills:  VRIO  Analysis/Core  Competence  Metaphor   •  Style:  OrganizaMonal  Culture  Analysis   •  Structure:  OrganizaMonal  Structure  Analysis  •  Fit  and  Performance   •  Fit:  Modified  7S  Analysis   •  Performance:  Financial  Analyses  
  37. 37. Table of Contents•  Strategy  FormulaLon   •  SOGs:  Vision,  Mission,  Purpose,  Goals,  and  Mantra   •  Strategy  as  PosiMon:  Business  Level  Strategy  •  Strategy  ImplementaMon   •  Skills:  VRIO  Analysis/Core  Competence  Metaphor   •  Style:  OrganizaMonal  Culture  Analysis   •  Structure:  OrganizaMonal  Structure  Analysis  •  Fit  and  Performance   •  Fit:  Modified  7S  analysis   •  Performance:  Financial  Analyses  
  38. 38.    Strategy  FormulaLon              Strategy  ImplementaMon            Fit  and  Performance   Strategy  FormulaLon  &  Strategy  ImplementaLon   Strategy   FormulaLon   Strategy   (as  PosiMon)   Structure   Style   (OS,  VCA)   (L&C)   SOGs,   SG,  VMPGs,   Strategy   (as  Plan)   Systems   Skills   (VCA)   (CC,  VCA)   Staff   (L&C,  VCA)   Strategy  ImplementaLon  
  39. 39.    Strategy  FormulaLon              Strategy  ImplementaMon            Fit  and  Performance   Vision,  Mission,  Purpose,  Goals,  Mantra  Vision/Mission/Purpose:    Stated  Mission:  “To  inspire  and  nurture  the  human  spirit  –  One  person,  One  cup,  and  One  Neighborhood  at  a  Mme.”  •  Our  Coffee  “Has  always  been,  and  will  always  be,  about  quality.”  •  Our  Partners  “We  embrace  diversity  to  create  a  place  where  each  of  us  can  be  ourselves.    We  always  treat  each  other   with  respect  and  dignity.”  •  Our  Customers  Our  work  goes  far  beyond  fine  coffee.    “It’s  really  about  human  connecMon.”  •  Our  Stores  “Our  stores  become  a  haven,  a  break  from  the  worries  outside…It’s  about  enjoyment  at  the  speed  of  life…”  •  Our  Neighborhood  “We  take  our  responsibility  to  be  good  neighbors  seriously.”  •  Our  Shareholders  –  “As  we  deliver  in  each  of  these  areas,  we  enjoy…success  that  rewards  our  shareholders.”      Vision:  “While  we  are  a  coffee  company  at  heart,  Starbucks  provides  much  more  than  the  best  cup  of  coffee—we  offer  a  community  gathering  place  where  people  come  together  to  connect  and  discover  new  things.  We  are  always  looking  for  innovaMve  ways  to  surprise  and  delight  our  customers.”    -­‐  Howard  Schultz      
  40. 40.    Strategy  FormulaLon              Strategy  ImplementaMon            Fit  and  Performance   Vision,  Mission,  Purpose,  Goals,  Mantra  Goals:  •  Become  the  leading  retailer  and  brand  of  coffee  in  each  of  our  target  markets  by  selling  the  finest  quality  coffee  and   related  products,  and  by  providing  each  customer  with  a  unique  experience  •  Refocus  on  the  consumer  experience  in  stores  and  our  posiMon  as  a  third  place  between  home  and  work  where  people   can  gather  together  for  human  connecMon  •  Achieve  sustainable  growth  in  established  internaMonal  markets  while  at  the  same  Mme  invesMng  in  emerging  markets   such  as  China,  Brazil,  and  Russia  •  Focus  on  relevant  informaMon  and  profitable  growth  opportuniMes  through  the  offering  of  new  products  and  pla€orms  •  ConMnue  to  be  known  as  a  corporate  leader  in  social  responsibility                Mantra:                                          The  Third  Place.  
  41. 41. Table of Contents•  Strategy  FormulaLon   •  SOGs:  Vision,  Mission,  Purpose,  Goals,  and  Mantra   •  Strategy  as  PosiLon:  Business  Level  Strategy  •  Strategy  ImplementaMon   •  Skills:  VRIO  Analysis/Core  Competence  Metaphor   •  Style:  OrganizaMonal  Culture  Analysis   •  Structure:  OrganizaMonal  Structure  Analysis  •  Fit  and  Performance   •  Fit:  Modified  7S  analysis   •  Performance:  Financial  Analyses  
  42. 42.    Strategy  FormulaLon              Strategy  ImplementaMon            Fit  and  Performance   Strategy  FormulaLon  &  Strategy  ImplementaLon   Strategy   FormulaLon   Strategy   (as  PosiMon)   Structure   Style   (OS,  VCA)   (L&C)   SOGs,   SG,  VMPGs,   Strategy   (as  Plan)   Systems   Skills   (VCA)   (CC,  VCA)   Staff   (L&C,  VCA)   Strategy  ImplementaLon  
  43. 43.    Strategy  FormulaLon              Strategy  ImplementaMon            Fit  and  Performance   Porter’s  Strategy  Typology   Type  of  Advantage   DifferenLaLon   Low  Cost   Scope    of  Advantage   Broad   Broad   Broad   Scope   DifferenLaLon   Low  Cost   (Starbucks)   Narrow   Focused   Focused   Scope   Low  Cost   DifferenLaLon  
  44. 44.    Strategy  FormulaLon              Strategy  ImplementaMon            Fit  and  Performance   Business  Level  Strategy  Analysis  Type  of  Advantage:  DifferenLaLon    Perceived  Uniqueness  of  Product…  •  Intense  focus  on  the  experience,  store  atmosphere,  and  quality  service  •  Powerful  brand  name:  “grabbing  some  Starbucks”  instead  of  “grabbing  a  cup  of  coffee”  •  “It’s  not  just  a  cup  of  coffee.    It’s  Starbucks”     …Leads  to  a  Willingness  to  Pay  a  Premium  Price   •  Higher  prices  than  numerous  other  compeMtors  such  as  Dunkin   Donuts  and  McDonalds   •  Similar  prices  to  local  and  regional  specialty  shops  such  as   Kaldi’s  and  Lakota   •  Numerous  news  and  opinion  arMcles  about  high  product  prices      
  45. 45.    Strategy  FormulaLon              Strategy  ImplementaMon            Fit  and  Performance   Business  Level  Strategy  Analysis  Scope  of  Advantage:  Broad    Geographic  •  Nearly  16,000  retail  stores  in  over  50  countries    Consumers  •  Serves  a  variety  of  customers  from  around  the  world,  in  both  rural  and  urban  locaMons,   and  across  many  demographics  Products  •  A  variety  of  products  -­‐-­‐  including  specialty   coffees  and  drinks,  sandwiches  and  pastries,   instant  coffees,  teas,  ice  cream,  alcoholic   products,  and  more          
  46. 46.    Strategy  FormulaLon              Strategy  ImplementaMon            Fit  and  Performance   Strategy  FormulaMon:  Strengths  and  Weaknesses  Strengths  •   Strong  focus  on  customer  experience  aligns  well  with  Mantra:  “The  Third  Place”  (VMPG/M)  •   Customer  affinity  for  quality  Starbucks  products  has  led  to  strong  brand  idenMficaMon  (Business  Level  Strategy)  •   InternaMonal  development  goals  posiMon  Starbucks  to  take  advantage  of  emerging  markets  (VMPG/M)  •   New  products  have  allowed  Starbucks  to  penetrate  new,  profitable  markets  (Business  Level  Strategy)          Weaknesses  •   Premium  prices  and  price  hikes  drive  less-­‐affluent  customers  to  cost-­‐leadership  providers  such  as  McDonalds  and  Dunkin  Donuts  (Business  Level  Strategy)  •   Rapid  expansion  has  led  to  over-­‐saturaMon  in  U.S.  markets,  causing  Starbucks  to  recently  close  some  outlets  (VMPG/M)  
  47. 47. Table of Contents•  Strategy  FormulaMon   •  SOGs:  Vision,  Mission,  Purpose,  Goals,  and  Mantra   •  Strategy  as  PosiMon:  Business  Level  Strategy  •  Strategy  ImplementaLon   •  Skills:  VRIO  Analysis/Core  Competence  Metaphor   •  Style:  OrganizaMonal  Culture  Analysis   •  Structure:  OrganizaMonal  Structure  Analysis  •  Fit  and  Performance   •  Fit:  Modified  7S  analysis   •  Performance:  Financial  Analyses  
  48. 48.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   Strategy  FormulaLon  &  Strategy  ImplementaLon   Strategy   FormulaLon   Strategy   (as  PosiMon)   Structure   Style   (OS,  VCA)   (L&C)   SOGs,   SG,  VMPGs,   Strategy   (as  Plan)   Systems   Skills   (VCA)   (CC,  VCA)   Staff   (L&C,  VCA)   Strategy  ImplementaLon  
  49. 49. VRIO  Framework   Resource/Capability V R I O WiFi Internet Access R&D Skills     Ability to Raise Capital Coffee Brewing Equipment Human Resource Management Coffee House Set Up   Employee Compensation   Quality Product Mix Coffee House Locations Employee Benefits Socially Responsible Corporate Image Buying Power Number of Coffee Houses Propensity for InnovationCore  Competencies Relationships with Coffee Farmers Customer Experience Corporate Leadership & Vision Renowned Brand
  50. 50.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   CC  Metaphor:  In  Every  Starbucks  Cup…    Core  Competencies   End  Products            -­‐  Corporate  Leadership  &  Vision                    -­‐  RelaLonships  with  Farmers                                              -­‐  Propensity  for  InnovaLon   •  More  than  16,000     stores  in  over  50       countries      -­‐  Customer  Experience   •  More  than  30  blends   and  premium     arabica  coffees     •  Full  menu  of  coffees,      -­‐  Renown  Brand   espressos,  blended             beverages,   smoothies,  and  teas        
  51. 51. Table of Contents•  Strategy  FormulaMon   •  SOGs:  Vision,  Mission,  Purpose,  Goals,  and  Mantra   •  Strategy  as  PosiMon:  Business  Level  Strategy  •  Strategy  ImplementaLon   •  Skills:  VRIO  Analysis/Core  Competence  Metaphor   •  Style:  OrganizaLonal  Culture  Analysis   •  Structure:  OrganizaMonal  Structure  Analysis  •  Fit  and  Performance   •  Fit:  Modified  7S  analysis   •  Performance:  Financial  Analyses  
  52. 52.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   Strategy  FormulaLon  &  Strategy  ImplementaLon   Strategy   FormulaLon   Strategy   (as  PosiMon)   Structure   Style   (OS,  VCA)   (L&C)   SOGs,   SG,  VMPGs,   Strategy   (as  Plan)   Systems   Skills   (VCA)   (CC,  VCA)   Staff   (L&C,  VCA)   Strategy  ImplementaLon  
  53. 53.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance  OrganizaMonal  Culture  Analysis  
  54. 54.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance  OrganizaMonal  Culture  Analysis  
  55. 55.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   Strength  OrientaMon:  5  Cohesive  and  Strong   -­‐Summary-­‐   Starbucks’  culture  is  centered  around  an  obsession  with  coffee.  Ranging  from  partners   to  the  Chief  ExecuHve  Officer,  coffee  is  a  way  of  life  for  every  member  of  the   organizaHon.  From  growing  in  the  mountains  of  Costa  Rica  to  the  final  product  in  your   local  retail  store,  partners  are  oriented  to  the  many  facets  of  coffee  from  training  on.      •  “Monthly  Mingle”  events  are  held  to  bring  together  employees  across  retailers   and  encourage  cohesive  and  strong  unity  amongst  all  employees.  •  Starbucks  sponsors  over  50  clubs  to  inspire  the  sharing  of  interests  and  to   sMmulate  a  work/life  balance.     –  Bowling  League,  China  Club,  SCUBA  Club,  French  Club,  Bike  Club,  Japanese  Club,  and  Parents   Network  are  some  of  the  examples.    •  Starbucks’  culture  encourages  the  valuing  of  employees.  Thus,  individual  stores   conduct  internal  recogniMon  programs  to  ensure  appreciaMon  for  hard  work  and   being  a  valuable  team  member  of  Starbucks.  
  56. 56.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance  OrganizaMonal  Culture  Analysis  
  57. 57.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   Outcome  OrientaMon:  4.5  Focused  on   Performance   -­‐Summary-­‐   Starbucks  culture  encourages  premium  customer  service.  One  store   manager  claims  he  has  300  locals  frequent  his  store  daily.  He  knows   their  names,  what’s  going  on  in  their  lives,  and  of  course,  their  preferred  choice  of  beverage.  Starbucks  culture  encourages  hard  work  in  the  presence  of  the  creaHon  of  a  relaxing,  comfortable  environment   for  customers.    •  Starbucks  is  a  publicly  traded  company  and  has  a  fiduciary   responsibility  to  shareholders  to  earn  a  profit  and  grow  quarterly.    •  Starbucks  has  a  strong  sense  of  idenMty  and  unity  amongst  its   employees;  however,  customer  service  and  excellence  in  product   quality  transcend  enjoyment  of  work.  Starbucks  strives  to  achieve   both.  Although,  it’s  always  about  the  customer.  
  58. 58.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance  OrganizaMonal  Culture  Analysis  
  59. 59.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   Support  OrientaMon:  1  Focused  on  People   -­‐Summary-­‐   Starbucks  was  founded  with  a  culture  dedicated  to  the  welfare  of  those  who   appreciate  and  respect  the  coffee  bean.  Starbucks’  culture  encourages  partners  to   wake  up  daily  and  head  to  work    hoping  to  do  two  things:  share  great  coffee  with   friends  and  to  help  make  the  world  a  li[le  be[er.  Starbucks  provides  incredible   employee  benefits  from  the  day  you  step  onboard.  Each  compensaHon  package  is   specially  tailored  to  you.    •  “The  Starbucks  Total  Pay  package  is  called  “Your  Special  Blend”  because  it’s  just   for  you.  Your  Special  Blend  might  include:   •  CompeMMve  pay,  Insurance:  medical,  prescripMon  drug,  dental,  vision,  life,   disability,  Bonuses,  Paid  Mme  off,  ReMrement  savings  plan,  Stock  opMons  and   discounted  stock,  purchase  plan,  AdopMon  assistance,  DomesMc  partner   benefits,  Emergency  financial  aid,  Referral  and  support  resources  for  child   and  eldercare,  A  free  pound  of  coffee  each  week.”  •  “It’s  a  lot  like  working  with  friends.  We  call  each  other  “partners.”  We  respect  our   customers  and  each  other.  We’re  dedicated  to  serving  ethically  sourced  coffee,   caring  for  the  environment  and  giving  back  to  the  communiMes  where  we  do   business.  And  we’re  sMll  small  enough  to  remember  your  name  when  you  walk  in   the  door.”    
  60. 60. Table of Contents•  Strategy  FormulaMon   •  SOGs:  Vision,  Mission,  Purpose,  Goals,  and  Mantra   •  Strategy  as  PosiMon:  Business  Level  Strategy  •  Strategy  ImplementaLon   •  Skills:  VRIO  Analysis/Core  Competence  Metaphor   •  Style:  OrganizaMonal  Culture  Analysis   •  Structure:  OrganizaLonal  Structure  Analysis  •  Fit  and  Performance   •  Fit:  Modified  7S  analysis   •  Performance:  Financial  Analyses  
  61. 61.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   Strategy  FormulaLon  &  Strategy  ImplementaLon   Strategy   FormulaLon   Strategy   (as  PosiMon)   Structure   Style   (OS,  VCA)   (L&C)   SOGs,   SG,  VMPGs,   Strategy   (as  Plan)   Systems   Skills   (VCA)   (CC,  VCA)   Staff   (L&C,  VCA)   Strategy  ImplementaLon  
  62. 62.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   OrganizaMonal  Structural  Analysis   Organic  Structure   Dimension  of  Structure   MechanisLc  Structure     Formalization     The extent to which rules  Few  (formal)  wri7en  rules   exist in written form and Lots  of  (formal)  wri7en  and  regulaMons;  more   cover a wide range of rules  and  regulaMons;  “by  informal  approach.     contingencies. the  book”  approach.       1 2 3 4 5 6 7 8 9 10  —Although    Starbucks’  culture  is  one  of  employee,  or  “partner”,  empowerment  and  saMsfacMon,  there  sMll  exists  much  literature  on  policies  and  pracMces  for  the  corporaMon.      —With  such  a  large  internaMonal  company,  such  standards  need  to  be  in  place  to  keep  the  machine  running  smoothly  and  consistently  in  every  store.            
  63. 63.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   OrganizaMonal  Structural  Analysis   Organic  Structure   Dimension  of  Structure   MechanisLc  Structure     Centralization  Decision  making  is   The extent to which decisions Decisions  are  made  at  or  delegated  to  empowered   are made at or near the top of near  the  top  of  the  individuals  at  lower  levels   the organization’s hierarchy. organizaMon.    in  the  organizaMon.       1 2 3 4 5 6 7 8 9 10  —Again,  due  to  their  large  size,  Starbucks  requires  a  more  mechanisMc  approach  in  dealing  with  decisions  and  bureaucracy  in  order  to  sustain  a  stable,  consistent  image  internaMonally.  —”In  response  to  a  rash  of  unhealthy  hallway  conversaMons  that  were  undermining  the  effecMveness  of  Starbucks  project  teams  in  the  early  2000s,  then-­‐CEO  Orin  Smith  posted  “EffecMve  MeeMng  Rules”  signs  in  every  conference  room.”  
  64. 64.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   OrganizaMonal  Structural  Analysis   Organic  Structure   Dimension  of  Structure   MechanisLc  Structure     Hierarchy of Authority     The extent to which there are     many levels in the  Flat,  horizontal  hierarchy.     organization’s hierarchy. Tall,  verMcal  hierarchy.         1 2 3 4 5 6 7 8 9 10  —Starbucks  has  a  fairly  general,  balanced  hierarchy  of  authority  that  leans  slightly  to  the  mechanisMc  side,  which  is  understandable  for  a  large  company  that  sMll  holds  the  interests  of  lower  level  employees  close  at  heart.  —One  interesMng  caveat  in  their  hierarchy  is  their  inclusion  of  “The  Customer”  on  their  organizaMonal  chart.  
  65. 65.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   Company  Hierarchy   CEO   Level  1   Howard   *  “The  Starbucks  culture  believes   }   Schultz   there  is  only  one  organizaMonal   chart  that  truly  ma7ers  to  a   customer-­‐first  business,  and  that   Board  of  Directors   Level  2   one  has  every  employee   symbolically  reporMng  to  the  real   Upper  Management   Level  3   boss—the  customer.”   Regional  (Middle)  Managers   Level  4   Store  Managers   Level  5   Shil  Supervisors   Level  6   Clerk  Supervisors   Level  7   Baristas     Level  8  
  66. 66.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   OrganizaMonal  Structural  Analysis   Organic  Structure   Dimension  of  Structure   MechanisLc  Structure     Specialization  Employees  perform  a  wide   The extent to which tasks are Each  employee  performs  range  of  tasks  in  their  job;   subdivided into separate jobs only  a  narrow  range  of  fluid  roles;  overlapping   tasks;  rigid  roles;  task  are  tasks.   separated  with  li7le/no   1 2 3 4 5 6 7 8 9 10   overlap.        —Whether  a  barista,  clerk,  or  manager,  each  task  is  clearly  defined  and  rigid  to  the  employee.  —SpecializaMon  helps  their  stores  funcMon  more  efficiently  and  smoothly  because  each  employee  has  their  roles  solidified,  allowing  their  coffee  to  be  delivered  to  customers  in  the  quickest  way  allowable.  
  67. 67.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   OrganizaMonal  Structural  Analysis   Organic  Structure   Dimension  of  Structure   MechanisLc  Structure     Standardization  People  are  free  to  create   The extent to which things are OrganizaMon  consistently  and  introduce  new  ideas   done the same, time after time. and  rouMnely  does  things  which  means  that  their   the  same  way  Mme  aler  organizaMons  are  less   Mme.    likely  to  rouMnely  do   1 2 3 4 5 6 7 8 9 10  things  the  same  way  Mme    aler  Mme.      —Starbucks’  unique  menu  and  drink-­‐building  style  allows  customers  to  fully  customize  their  order,  which  leads  to  freedom  for  the  baristas,  and  customers,  to  make  whatever  drink  they  desire.  —Their  menu  and  coffee  offered  fluctuates  seasonally,  and  they  also  offer  a  “Blend  of  the  Day”  which  varies  day-­‐to-­‐day.  
  68. 68.    Strategy  FormulaMon              Strategy  ImplementaLon            Fit  and  Performance   Structural  Dimensions  Summary    6.2  Moderately  MechanisLc  —Although  Starbucks’  culture  is  fun-­‐loving  and  free  spirited,  the  overall  management  takes  the  form  of  Moderately  MechanisMc.  This  became  a  requirement  due  to  the  company’s  rapid  expansion  and  their  now  massive,  internaMonal  stature.   Starbucks  Center  –  Sea7le,  Washington  

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