December 2015 Edition of BEACON, A Monthly Newsletter by SIMCON. Inside this issue: About Us Our Team INDUSTRY ANALYSIS : Shipping Industry COMPANY ANALYSIS : Great Eastern Shipping Company BRAND ANALYSIS : Starbucks Concept of the month: Vitality Curve

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Contents
ABOUT US
OUR TEAM
INDUSTRY ANALYSIS
COMPANY ANALYSIS
BRAND ANALYSIS
CONCEPT OF THE MONTH:
VITALITY CURVE

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OUR PRESENCE
ABOUT US
VISION
The SIMCON - SIMSREE consulting club is an
initiative started in 2012 for those students in
pursuit of excellence in management consulting
and strategic management. Aimed at creating
awareness among the students about consultancy
as a discipline, the club strives to maintain strong
relations with top consultancy firms and provide
platform to craft highly skilled & competent
consultants from SIMSREE. The club is a resource
for information about consulting and a place for
students to obtain real-world consulting experience.
SIMCON provides an avenue of interaction among
faculty, students and alumni through competitions,
live projects, guest lectures, and conclaves. For
this purpose the club has also been publishing its
monthlynewsletter– BEACON (BE A CONSULTANT)
and maintains a FACEBOOK PAGE where latest
news and development in the consulting industry
are posted.
MISSION
To create awareness amongst the students
about consulting industry & its latest trends.
To maintain strong relations with top
consultancy firms.
To provide platform to craft highly skilled &
competent consultants from SIMSREE.
To provide exposure to students via
competitions, live projects, guest lectures &
conclaves.
Contributions invited:
To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We
invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a
cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your
entries to simcon.simsree@gmail.com.
Best Regards,
SIMCON - SIMSREE CONSULTING CLUB

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`
OUR TEAM
SANANDANDESHPANDE
NIKHILRAO
AMEYAMAHABAL
CHITRAWANI
DEEPESHJETHWANI
PRATHMESHINDANI
SUSHILGURAV

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OUR TEAM
ARPIT AGrAWAL
HUZEFABODABHAIWALA
AshayDhuri
KARANCHOPRA
NAMANCHANDAK
PRACHIKORE
SARANGKULKARNI
YOGESHMOHATA

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SHIPPING INDUSTRY
INDUSTRY ANALYSIS

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Overview
Shipping is one of the earliest industries to come into
practice in India with the earliest ports to be recorded
inLothal,Gujaratalmost4500yearsback.Shippinghas
always been the most dominant medium for trading
all over the world since those times. Today also almost
95% of India’s trade by volume and 70% of India’s trade
by value is done through maritime transport.
India is a country with a coastline spanning 7500
kms., making it one of the biggest peninsulas in the
world. Such an extensive coastline harbours 12 major
ports and almost 200 notified minor and intermediate
ports.
Major Ports: Cargo Handled
Name
Cargo Handled
(FY2013-14)
Vessel Traffic
(FY2012-13)
Container
Traffic
Million
MT
(MMT)
% in-
crease
(over
pre-
vious
FY)
Nos.
% in-
crease
(over
pre-
vious
FY)
‘000
TEUs
% in-
crease
(over
pre-
vious
FY)
Kandla 87.00 -7.06 2734 0.74 29 -75.42
Paradip 68.00 20.25 1279 -4.96 9 -30.77
JNPT 62.37 -3.32 2588 -11.25 4161 -2.30
Mumbai 59.19 1.98 1949 -5.25 41 -14.58
Vizag 58.50 -0.91 2066 -16.36 263 6.48
Chennai 51.11 -4.30 1928 -5.63 1468 -4.68
Kolkata 41.39 3.65 3155 -0.91 563 -6.17
Manga-
lore
39.37 6.29 1096 -5.11 50 4.17
Tutikorin 28.64 1.35 1292 -13.40 508 6.72
Ennore 27.34 -52.85 475 23.38 - -
Kochi 20.89 5.25 1367 -1.09 351 4.78
Mor-
mugao
11.74 -33.65 473 39.75 22 10.00
Total
(India)
555.50 1.78 20402 -6.95 7465 -3.10
Source: Indian Ports Association
In the year 2015, almost 1050 MMT of cargo traffic was
recorded; a tremendous growth from 555.50 MMT in
2013-14, and it is expected to further grow to 1758
MMT by 2017. The government is the most important
stakeholder in this industry as shipping plays a very
important role in the growth and sustenance of the
country’s trade and commerce. In order to boost up
the sector, government has allowed 100% FDI in port
and harbour construction and maintenance projects
and also exempted organisations, those who develop,
maintain and operate ports, inland waterways and
inland ports, from taxes for 10 years.
For the year 2014-15, all the Indian ports operated at
an average 66% efficiency, handling lower cargo than
their capacity showing that India is ably meeting its
trade demands. The government has taken various
measures to improve efficiencies of Indian ports
through mechanisation, deepening the draft and
speedy evacuations and also approved an ambitious
project ‘Sagarmala’ to modernize the existing ports in
India.
The Department of Industrial Policy and Promotion
(DIPP), Ministry of Commerce and Industry, reported
that the Indian ports sector received FDI worth US$
1,637.3 million between 2000 and 2015. The ports
sector was also awarded 30 projects in FY14, investing
over Rs 20,000 crore (US$ 3.16 billion), which is a
threefold increase over the preceding year.
Shipping Corporation of India (SCI), a Public Sector
Unit (PSU) of the Indian Government, is the biggest
shipping company in India with almost 80 ships. But
many private players such as Essar Shipping, The Great
Eastern Shipping Companies, Bharati Shipyard and so
on are also playing a major role in the industry.
Cargo Profile: FY15

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Some Of The Major Players In Indian Shipping Sector
Major Play-
ers
About the Company
Net
Sales
In Cr.
Net
Profit
In Cr.
Market
Cap
In Cr.
The Ship-
ping Cor-
poration of
India Ltd
It is the No.1 shipping company in India founded in 1961 by
government of India. Its main business is shipping and has
more than 79 vessels. It employees around 3000 people.
4310.97 200.93 4387.83
Essar Ship-
ping
Also known as Essar shipping ports and logistics limited was
founded in 1945. The company has around 26 vessels and
carries crude oil and bulk cargo. No of employees are around
5000
791.14 -83.00 695.72
The Great
Eastern
Shipping
Companies
It is among the largest shipping company in India. The main
business of the company is shipping and offshore. It also car-
ries crude oil in bulk and has more than 20 vessels. It employ-
ees around 2500 people.
1734.08 317.30 5570.46
Bharati
Shipyard
Bharati is India’s largest shipbuilding company. This company
is only into building ships and not carrying goods like crude
oil. The company was founded in 1973. The company employ-
ees around 3500 people.
38.72 -864.58 171.27
ABG Ship-
yard
ABG was incorporated in the year 1985. With main business
of shipbuilding and designing like bharati shipyard. No of
employees are around 3000
392.16 -897.70 390.91
Mercator
Limited
The company is second largest private sector shipping com-
pany in India in terms of tonnage transported. The company’s
main business includes shipping, coal, dredging and offshore
business. No of employees is around 2500
659.42 49.55 708.96
Gujarat
Pipavav
The company is relatively new and was founded in year 1997.
The core business of the company is ship building and they
build merchant vessels, Offshore supply vessels, Pressure
vessels etc. Number of employees working for the company is
around 3000
867.03 387.28 7638.35
Porter’s Five Force Analysis
Threat Of New Entrant: MODERATE
• With the increase in world trade and ease of norms
and barriers, it is an incentive attracting new
entrants
• However the problem pertains to large capital
investments in form of vessel and container
procurements and risk of operating vessels.
• Many foreign players involved who have their
arms extended in India
Threat Of Substitutes: LOW
• Threat of substitutes is low. But the increase in
FDI is making local manufacturing popular and
therefore a threat to the shipping industry.
Supplier Power: Low
• Due to the high no. of suppliers the price factor
remains weak for them
• For the supplier’s perspective the switching cost is
very high.
Buyer Power: HIGH
• Buyer is one of the strongest factor in shipping
line business. Buyers may be in form of importer
and exporter, clearing agent, freight forwarder or
manufacturer of goods.
• Due to high competition the bargaining power of
the buyers is high
• Buyer’sinformationandawarenessisalsomoderate
to high
Competitor Rivalry: HIGH
• There is large no. of competitors and therefore the
competition is high. Industrial growth and new
opportunities attract new entrants.
Global Outlook
The decline in commodity prices globally especially
crude oil prices is expected to boost world GDP by
shifting ‘real income’ from producing to consuming
nations such as the US, China and India. The US
economy is growing on the advantages of a strong
currency and lower commodity prices, where growth
is expected to exceed 3% in 2015-16.

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The rise in global GDP growth directly affects the
international trade (export and imports) and in
turn affects the shipping industry as about 80% of
the international trade by volume is carried out by
shipping.
Opportunities
The global GDP is expected to grow at a rate more
than 2.8% in 2016. This, however, is dependent on
the two largest economies, US and China followed by
emerging economies such as India. US is expected to
grow by 3.1% in 2016, up from just 2.2% for 2015 as
a whole. The outlook for Chinese economy in 2016 is
mixed, with some slowdown relative to the previous
year. The Chinese GDP growth is expected to remain
at 6.8% in 2016, down from 7-8% growth in past
many quarters mainly on the backdrop of declining
industry output and falling demand. The developing
Asia region is also expected to perform better in
2016 as compared to 2015 with India poised to
surpass China for the first time. The low oil prices are
expected to improve the economic situations of most
of the emerging Asian nations supporting the basis
for a prosperous economic outlook. The European
and Japanese economies is expected to show modest
growth in 2016.
Risk and Concerns
Geopolitical tensions, declining industry output and
falling demand in China remain the major macro
risks across the globe. Also the low crude oil prices
have hit the economies of oil exporting countries both
Middle East and Russia who in turn may be forced
to cut subsidies and consequently hurt demand. The
decision of the Chinese Government to increase the
percentage of non-fossil fuels in its total energy mix
could curtail future oil demand from the country. The
crude tankers rates are also expected to remain flat
during 2015-18. Similarly in the dry bulk segment, the
rising interest rates in emerging economies could lead
to slowing import demand. Additionally, relatively
flat steel production in the developing Asia region
due to weaker Indian economy remains a matter of
concern. The global containerized trade growth, in the
likely event of the economy not recovering, would be
limited to 3.9% in 2015 managing only a 5% expansion
in 2016. Lower economic growth and global demand
may while pushing oil and bunker prices lower help
induce further speed gains in the charter fleet and the
resulting productivity gains would lead to reduction
of further 1% charter fleet utilization in 2015 and 1.5%
in 2016.
Recent Developments in Indian Shipping
Industry
Indian shipping industry contributed 8% of the
entire world trade in terms of volume, which has the
contribution of nominal 1.3% in monetary terms.
India and china were in the same position 30 years
ago, but today china has raced ahead in the field. Of
the $30bn freight market in India, only 8% of freight
on Indian flagged ships is carried.
There are immense opportunities which are needed
to be grabbed by the shipping company of India.
Liquefies natural gas (LNG) has to be imported to
harness India’s power and fertilizer projects. This plan
would involve huge volume of business for shipping
industry amounting to several billion dollars.
Therefore, an important step for the Indian shipping
companies would be to build strategic tie-ups with the
foreign counterparts.
Other than the hardcore price increases and very
hands-on changes in the shipping industry’s business
opportunities, the industry will have to relate to the
big changes going on in the world in general. The
geopolitical issue is not as influential as the change in
fuel prices but it is clear that with an OECD population
of 1.3 billion people and a non-OECD population of
6 billion people, we will see a lot more people from all
over the world being involved in the shipping industry.
The last change affecting the industry is the new and
increased level of legislation. “Carriers will depend
much on the industry and the industry’s ability to
tell people which opportunities they have to find new
technical solutions to the demands we will see through.
Conclusion
India's shipping sector is witnessing promising growth
on account of better global and domestic situation,
which is reflected in the increase in the demand for
infrastructure and services across the entire value
chain comprising shipping, ports, ship-building
and logistics. While this growth has thrown up
bottlenecks in infrastructure and service provisioning
across the sector, it has also opened up opportunities
in each segment. Therefore, it is critical to pursue
comprehensive measures at the policy, administration,
and project level in each segment, so that bottlenecks
are addressed and opportunities are capitalized upon,
thereby ensuring that the growth momentum is
sustained.
References
EquityMaster – Shipping Sector Analysis, KPMG – Shipping
Report, MoneyControl, Live Mint – Indian Shipping Market,
Ship India, IBEF – Indian Shipping Ports

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GREAT EASTERN SHIPPING
COMPANY ANALYSIS

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Company Overview
The Great Eastern Shipping company is the largest
private sector shipping company in India. It was
started in 1948 by two families- the Sheths and the
Bhiwandiwallas. In its Shipping business it is majorly
involved withdry bulk carriers and tankers. Many
International oil companies like Shell, BP, Exxonmobil,
Chevron Texaco and Totalfina are using the tankers of
Great Eastern Shipping for transportation of their oil.
The company started as a provider of sea logistics in
its formative years and then later ventured into tramp
shipping and further diversified into off shore oil field
services.
Evolution Over The Years
Management
Name Designation
Mr. K. M. Sheth Chairman
Mr. Bharat K. Sheth
Dy. Chairman & Man-
aging Director
Mr. Ravi K. Sheth Non Executive Director
Mr. TapasIcot
Executive Director &
President - Shipping
Mr. G Shivakumar
Executive Director &
CFO
Mr. Berjis Desai Director
Mr. Farrokh K. Kavarana Director
Ms. Rita Bhagwati Director
Mr. Cyrus J. Guzder Director
Mr. Vineet Nayyar Director
Dr. Shankar Acharya Director
Shareholding Pattern
Great Eastern Shipping Company delivers Kamsarmax Dry Bulk Carrier Jag Aakash to the
buyers.2015
2008 JointventureannouncedwithDOFSubseaASA,Norway
GEShippingwinscrudesupplyorderforMRPL.GEShippingacquires26-pcstakeinUSL2005
2003
Great Eastern entered into a joint venture agreement amongst Qatar General Petroleum
Corporation(QGPC) andUBAir Pvtltd.andunitedHelichartersPvtLtd.2002
1998
Due to turbulence in Asia with the freight market,operation of the bulk carriers were
adverselyaffected.TheCompanyacquired2AframaxtankersfromSamsungHeavyIndustries
Co.Ltd.
1997
1994
1990
1988
The Great Eastern Shipping Company (London) Limited was created by converting the
existingLondonbranchintoawhollyownedsubsidiary.
1985
ThecompanywasincorporatedandstartedprovidingcargoservicesinIndianandadjacent
waters
1948
Jag Vijay, Jag Rani, Jag Rahat and Jag Kala were four new ships that were bought by the
company.TheverynextyearItalsoboughtthreemorebulkcarriersandrenamedthemm.v.
JagRatna,m.v.JagVikasandm.v.JagRavi.AlsoMemorandumofAgreementsweresignedto
purchase five Offshore Supply Vessels (OSV) with a view to cater to both ONGC and Oil
India,Ltd.
TheCompanyembarkedonashipreplacement-cum-modernisationprogramme.Aspartof
thisprogrammeitacquiredone1984builthandymaxbulkcarrieranda1982builtproduct
carrierandbecamethefirstIndianCompanytoacquireatanker.
Due to unexpected changein government policy on sugar the trading division suffered a
setback. The Company identified charter opportunities with leading multinational
corporationsandorderedfor4minibulkcarriersforefficientserviceincoastalmovement.
The Shipping Corporation of India, Varun Shipping and Great Eastern Company (Gesco)
joined hands to transport liquefied petroleum gas (LPG) imported on free-on-board (FoB)
basis.
Great Eastern Company bagged the lighterage contract from IOCto move crude oil on the
eastcoast.
Key Financials
The tanker business accounted for around 85 % of
the Company’s operating revenues and 94 % of the
operating profits.The dry bulk fleet contributed
around 15% of the Company’s operating revenues but
just 6% of the operating profits.
FY15
(in INR
Crore)
FY14(in
INR
Crore)
Growth
Sales Turnover 1,734.08 1,492.58 16.18%
Operating Profit 562.32 493.17 14.02%
Profit Before Tax 333.30 208.68 59.72%
Reported Net
Profit
317.30 204.68 55.02%
There has been a substantial growth in Net profit of
the company over the previous year. The time charter
rates for crude oil carriers went up by 50% during
the year due to the collapse in the oil prices and the
subsequentincreaseinitsdemand.Thishascontributed
significantly to the increase in the net profits. The dry
bulk market has experienced a steady decline this year
except in the third quarter where there was a spike in
the demand. The key factors that derailed the dry bulk
freight market recovery were the relief of the grain
port congestion in South America during the 2nd

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quarter, the lack of coal demand from China, the after-
effect of the stockpiling ahead of the Indonesian ban
on raw ore exports, disappointing Chinese growth and
the continued robust fleet expansion.
0
1
2
3
4
5
6
7
8
ROCE
RONW
Mar '15Mar '14Mar '13Mar '12Mar '11
4.845.07
2.79
5.15
2.92
4.48
4.25
5.54
6.43
6.95
Profitability %
The return on capital employed has been improving
year on year. It was 4.25% last year and now has
improved to 6.43%.Also the return on Net Worth has
increased from 5.54% to 6.95% when compared to the
previous year.
0.0
0.7
1.4
2.1
2.8
3.5
Cur
Mar' 15Mar' 14Mar' 13Mar' 12Mar' 11
2.86
2.51
0.98
1.13 1.11
Current Ratio
The company has maintained a good current ratio
over the years. Though it suggests that company does
have enough liquid funds to take care of its short term
liabilities but still it must improve on this account as it
is simply able to meet the exact requirement and has
no wiggle room.
Theearningspersharehavealsoimprovedsignificantly
overthepreviousyearduetoasubstantialincreaseinthe
net profits. On this account of improved performance
the company has offered increased dividend of Rs 11/-
per share instead of Rs9/- per share.
Competitor Profiles
1. Shipping Corporation of India
The Shipping Corporation of India was established
in 1961, by collaboration of Eastern Shipping
Corporation & Western Shipping Corporation.
SCIstartedwithamarginallinershippingcompany
but today it is India’s biggest shipping company.
SCI’s owned fleet includes bulk barriers, crude
oil tankers, product tankers, container vessels,
passenger-cum-cargo vessels, chemical carriers
and offshore supply vessels.
SWOT Analysis

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2. Shreyas Shipping & Logistics Limited
Shreyas Shipping & Logistics Limited was
incorporated as a private limited company in
1988. Company is a part of Transworld Group
of Companies, which is promoted by Late R.
Sivaswamy. This group has over 35 years of
experience in shipping industry.
The primary business of the company is to
own and operate vessels between Indian ports
and internationally renowned container trans-
shipment ports.
3. Essar Shipping
Essar Shipping is an Indian shipping corporation
for the global energy business. Essar Shipping is
a part of Essar Group. It was started in 1945 but
it was incorporated in 2010. Company currently
has a fleet of 26 vessels, with additional 12 more
ships on order. Company also provides crude oil
and product transportation services
Competitor Analysis
Company
Market
Cap.
Sales
Turnover
Net
Profit
Total
Assets
Great
Eastern
Shipping
5518.44 1734.08 317.30 7499.66
Guajrat
Pipavav
Port
Limited
6898.69 867.03 387.28 1790.80
Shipping
Corpo-
ration of
India
4455.37 4130.97 200.93 12138.5
Shreyas
Shipping
&
Logistics
Limited
876.22 290.75 53.28 267.08
(All values in INR Crores)
By looking at the competitor analysis, we can say that
net profit margin of Great Eastern Shipping is 18.3%
where as net profit margin of Shipping Corporation
of India is 4.86% and net profit margin of Shreyas
Shipping & Logistics Limited is 18.32%. From this
it can be concluded that profitability of Shipping
Corporation of India is less secured than GE shipping
and Shreyas Shipping & Logistics Limited. Though
sales turnover of both companies is less than Shipping
Corporation of India their management of expenses is
better than Shipping Corporation of India. Shipping
Corporation of India and Essar Shipping, both have
invested heavily in fixed assets. This investment is
done because returns expected by both the companies
are over a long period. But, Great Eastern Shipping
has focused both areas that are operating efficiency &
long term returns. Shreyas Shipping & Logistics Ltd
and Essar Shipping have a weak profile as compared
to other competitors.
Future Outlook
In the year 2014-15, though the oil prices were
decreasing, company witnessed a slow start. But, in
the last quarter of the year oil prices just collapsed and
sudden increase in demand was seen. This incident
helped company to get its business back on track &
business has seen a substantial growth. Oil prices
are expected to remain low in future and one of the
reasons for it is the introduction of shale gas by USA
therefore business of the company is expected to grow
at a higher rate. Commodities other than oil always
have demand in the world so that business is also
expected to grow. Growing competitors can be threat
to a company.
References
MoneyControl – Great Eastern Shipping Company, GreatShip.
com

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STARBUCKS
BRAND ANALYSIS

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Overview
Starbucks Corporation is an American global coffee
basedinSeattle,Washington.Itisthelargestcoffee-house
companyintheworldwith23,391storesin62countries.
The first Starbucks opened in Seattle, Washington,
on March 30, 1971, by three partners who met
while they were students at the University of San
Francisco: English teacher Jerry Baldwin, history
teacher Zev Siegl, and writer Gordon Bowker. The
three were inspired to sell high-quality coffee beans
and equipment by coffee roasting entrepreneur Alfred
Peet after he taught them his style of roasting beans. In
1987, the original owners sold the Starbucks chain to
former employee Howard Schultz (present President
and CEO), who rebranded his Il Giornale coffee
outlets as Starbucks and quickly began to expand.
Starbucks first became profitable in Seattle in the
Great Eastern Shipping Company delivers Kamsarmax Dry Bulk Carrier Jag Aakash to the
buyers.2015
2008 Joint venture announced with DOF Subsea ASA, Norway
GE Shipping wins crude supply order for MRPL. GE Shipping acquires 26-pc stake in USL2012
2012
Celebrates 40th anniversary.
2011
1993
Starbucks Company goes public.
1992
1987
1985
1983
Schultz joins the Starbucks team.1982
Starbucks founded by Jerry Baldwin, Zev Siegal and Gordon Bowker as a single store in
Seattle’s Pike Place Market.
1971
While travelling in Italy, Schultz experiences Italian Coffee bars and inspires him.
Schultz leaves Starbucks to open II Giornale, a company serving espresso drinks using
Starbucks coffee beans.
Schultz purchases Starbucks from the founders and begins to expand throughout the US.
Opens first roasting plant in Washington.
Schultz leaves Starbucks to open II Giornale, a company serving espresso drinks using
Starbucks coffee beans.
early 1980s, and despite an initial economic downturn
with its expansion into the Midwest and British
Columbia in the late 1980s, the company experienced
revitalized prosperity with its entry into California
in the early 1990s. The first Starbucks location
outside North America opened in Tokyo in 1996;
overseas properties now constitute almost one third
of its stores. The company had opened an average
of two new locations daily between 1987 and 2007.
Company History
Products
Coffee: More than 30 blends and single‐origin
premium Arabica coffees.
Handcrafted Beverages: Fresh‐brewed coffee, hot and
iced espresso beverages, coffee and non‐coffee blended
beverages, Vivanno™ smoothies and Tazo® teas.
Merchandise: Coffee‐ and tea‐brewing equipment,
mugs and accessories, packaged goods, music, books
and gift items.
Fresh Food: Baked pastries, sandwiches, salads,
oatmeal, yogurt parfaits and fruit cups.
Consumer Products: Products in 13 countries
(Austria, Canada, China, Denmark, Germany, Ireland,
Japan, Korea, Mexico, Norway, Spain, UK and U.S.) in
three categories:
1. CoffeeandTea:Wholebeanandground(Starbucks
and Seattle’s Best Coffee brands), Starbucks VIA®
Ready Brew, Tazo® tea filter bags and tea latte
concentrates.
2. Ready‐to‐Drink (RTD): Starbucks® bottled
Frappuccino® coffee drinks, Starbucks Discoveries®
chilledcupcoffees,StarbucksDoubleshot®espresso
drinks, Starbucks Doubleshot® Energy+Coffee
drinks; Seattle’s Best Coffee® Iced Lattes, Tazo®
bottled iced and juiced teas.
3. Starbucks® Ice Cream: Super‐premium coffee and
coffee‐free flavours.
Marketing Strategy
1. Segmentation
• Every age group.
• Tech savvy individuals.
• Men and women.
• High disposable income.
• Brand focused.
• Savvy and avid coffee lovers who enjoy the
“Starbucks Experience”.

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2. Target Customer
• Starbucks targets commuters and captive
consumers.
• Commuters consist of people heading to or from
work or people on their lunch break.
• Captive consumers consist of those who are stuck
in a campus environment.
Eg: High school & college students, corporate
campuses.
3. Positioning
• Starbucks has positioned itself as an upscale brand
which provide rich experience.
• It is obvious from the mission statement that they
are trying to make it the best for socializing.
• Starbucks is trying to reposition itself as a “third
place” for its customers.
Marketing Campaigns
Blonde Roast
To promote its new blonde roast back in 2011
Starbucks did a coffee giveaway that was promoted
through its social channels. One of the central features
was a Facebook app that allowed people to learn about
the new product, claim a free cup of blonde roast and
send e-cards to their friends.
Starbucks also tweeted about the new brew and
product giveaway, with some posts directing people
back towards the Facebook app, but it wasn’t all
organic content. Starbucks also invested in Facebook
ads and Twitter ads that were targeted at certain cities
to make them more personalised.
In this case Starbucks was actually promoting the
return of its pumpkin spice latte by giving people the
chance to have the flavour available in their town a
week before the rest of the US.
Behind The Scenes
Though not necessarily a specific campaign, Starbucks’
use of Instagram deserves a mention as it has been
used as part of a brilliant branding exercise.
Starbucks doesn’t rely on any competition hashtags
or gimmicks, but simply posts interesting images that
give people a view behind the scenes of the company.
Starbucks also reposts photos taken by fans that show
its coffee cups in different locations.
This simple idea is a great way of creating a closer
relationship with customers and softening the
company image by showing the people behind the
product.
Pumpkin Latte
Starbucks in one of those brands that has the luxury
of passionate, loyal customers, so that means it can
generate huge excitement around the launch of new
products.
And One Social Fail
As a PR stunt Starbucks displayed Twitter messages
that used the hashtag #spreadthecheer on a big screen
next to an ice rink at the Natural History Museum
in London, but forgot to actually monitor what was
being posted.
Coming hot on the heels of the scandal over Starbucks’
UK taxes, the wall unsurprisingly became a prime
target for angry taxpayers.

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Success Formula
• Motivated employees & superior customer service
is the key success factor of Starbucks.
• Starbucks focuses on recruiting and developing
right people.
• Attractive compensation policies.
Corporate Social Responsibility
Ethical sourcing
To develop strong, long-term relationships with
farmers to ensure that they buy the high-quality
coffee their customers expect. They aim at growing
coffee using ethical trading and responsible growing
practices.
Environmental Stewardship
100% of cups will be reusable or recyclable and reduce
our environmental footprint through energy and
water conservation, recycling and green conservation
is the current target of the company.
Community Involvement
From the neighborhoods where their stores are located
to the ones where their coffee is grown - Starbucks
believe in being involved in the communities we are
part of-bringing people together, inspiring change and
making a difference in peoples’ lives.
Five Facts
• Starbucks has added an average 15 stores on a daily
basis since 1987.
• The average Starbucks customer visits the store
6 times per month while loyal 20% of customers
visit 16 times.
• There are over 87000 drink combinations at
Starbucks.
• The Starbucks cinnamon chip scone has more
calories than a McDonald’s quarter pounder with
480 calories.
• Starbucks uses 93 million gallons of milk and 2.3
billion paper cups per year.
Starbucks Company Recognition
Some of the recent awards and recognitions are
1. “No. 1 Best Coffee,” Fast Food and Quick
Refreshment categories
Zagat’s Survey of National Chain Restaurants –
2009‐2010
2. “No. 1 Most Popular Quick Refreshment Chain”
Zagat’s Survey of National Chain Restaurants –
2009‐2010
3. One of the “World’s Most Ethical Companies”
Ethisphere – 2007‐2010
4. “Most Ethical Company, European Coffee
Industry”
Allegra Strategies – 2009‐2010
5. “Best Coffee House, Germany”
Deutschland Institute for Service Quality – 2010
6. One of the “100 Best Corporate Citizens”
Corporate Responsibility Officer/Business Ethics
– 2000‐2010
7. One of the “Global 100 Most Sustainable
Corporations in the World”
Corporate Knights – 2010
8. One of “The 100 Best Companies to Work For”
FORTUNE – 1998–2000, 2002–2010
9. One of the “Most Admired Companies in America”
FORTUNE – 2003–2010
10. Oneofthe“BestPlacestoWorkforLGBTEquality”
The Human Rights Campaign – 2009‐2010
References
Infogr – Starbucks, Starbucks.com, Harvard Scholar – Starbucks
Case

18. VOLUME 03BEACON
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ISSUE 12
VITALITY CURVE
CONCEPT OF THE MONTH

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Vitality curve is a concept in which the employees of
an organization are graded based on their individual
productivity. It is also called as rank and yank,
forced distribution, stack ranking, stack ranking and
forced ranking. It is based on the Pareto principle.
This method is used about 60% of US Fortune 500
corporations. But some companies have stopped using
this method due to the criticism that it has drawn.
The vitality model that was developed by Jack Welch
has been described as a “20-70-10” system. It says that
top 20% of the workforce is most effective. The next
70% work at a satisfactory level followed by bottom
10% who are not at all productive and should be fired.
The organizations in which this system implemented,
have shown an increase in revenues and earnings.
Welch says that top executives should be divided into
“A”, “B” and “C” players. The characteristics of these
players are as follows:
“A” Players
1. Full of passion
2. Believe in completing tasks
3. Open to ideas
4. Have charisma
5. Can make business productive as well as enjoyable
6. Exhibit high energy levels
“B” Players
These are the people who work at a satisfactory
level. As they are majority of the workforce, they
are important for the organization even though they
might not depict the skillset of “A” players.
“C” Players
These are the non-productive players. They show
procrastination and very often fail to fulfil their
promises. They slow down the rate of progress of the
organization.
Advantages
1. Under this system managers are forced to rate the
employees which would otherwise would not have
been possible if such a system was not in place.
2. The organization is able to recognize its worst
performers and thus take appropriate actions
to improve the overall performance of the
organization.
3. It has allowed HR’s to be completely transparent
about compensation.
Disadvantages
1. AccordingtoWelsh,“A”playersshouldberewarded
and promoted in the organization while the “C”
players should be fired. However it must be noted
that when an “A” player is promoted, he will be a
top performer at the current job level. But when
promoted, he may keep on working on the same
level. This level may not meet the expectations and
hence the employee may become “B” player. If the
compensation received for “B” player at the higher
level is lower than that received by “A” player at
a lower level, it may result in reduction in overall
compensation of the employee and ultimately
refusal of promotion.
2. When employees are involved in hiring their peers,
they may prefer to avoid the best candidates with

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the fear that if the best candidates are selected,
they may face more competition at the “A” end of
the curve. It would thus lead to the hired people to
fit into the “C” category.
Companies Using This Philosophy
Management Consulting
Management consulting firms, including the Big
Four generally have this system. Specifically in
PricewaterhouseCoopers and Accenture, an approach
is used where if an employee is not promoted after a
certain length of time, then the employee is fired from
theorganizationbutongenerousterms.Theemployees
of Accenture are rated based on their performance
twice a year.
GE
GE was the first and the most famous organization to
implement this system. However after the departure
of Jack Welch from the organization, the system has
become less important and focus is places to improve
the bottom placed players.
Enron
Enron showcased the cons of using this system. The
employees of Enron, with the fear of being fired,
inflated the results and this ultimately lead to the
downfall of the organization.
Motorola
Motorola implemented the plan named IDE
(Individual Dignity Entitlement) in mid-90’s which
was similar to vitality curve. The name of the plan
was changes to PM (Performance Management). This
lead to about 50000 employees of Motorola, globally,
losing their jobs.
Dow Chemical
Curve program is used by Dow Chemical as part of its
Performance Management. The program was started
in 2005 and has been delivering mixed results.
IBM
IBM uses a vitality curve program known as Personal
Business Commitments (PBC). The PBC process
involves managers have to give a limited number of
favorable rankings to the employees. An employee’s
rating is not only dependent on manager’s opinion,
but also on opinion of the 2nd line manager on 1st
line manager.
Yahoo
QPR (Quarterly Performance Review) system was
institutes in Yahoo by CEO Marissa Mayer in 2012.
This system, just like vitality curve divided employees
under various categories.
References
Economist – Ranked and Yanked, Strategy Business – The Folly
of Forced Ranking, Rediff – Business – The Rank and Yank
Appraisal System