Strategic Analysis Of Starbucks Corporation Strateg.docx

Strategic Analysis Of Starbucks Corporation

By: Nithin Geereddy (ID: 80842082)
1) Introduction:
Starbucks Corporation, an American company founded in 1971
in Seattle, WA, is a premier roaster, marketer and
retailer of specialty coffee around world. Starbucks has about
182,000 employees across 19,767 company
operated & licensed stores in 62 countries. Their product mix
includes roasted and handcrafted high-
quality/premium priced coffees, tea, a variety of fresh food
items and other beverages. They also sell a variety of
coffee and tea products and license their trademarks through
other channels such as licensed stores, grocery and

national foodservice accounts.
1
Starbucks also markets its products mix with other brand names
within its
portfolio of companies, which include Teavana, Tazo, Seattle’s
Best Coffee, Starbucks VIA, Starbucks
Refreshers, Evolution Fresh, La Boulange and Verismo.
Starbucks had total revenue of $14.89 billion as of
September 29
th
, 2013.
2
2) External Environment Of The Retail Market For Coffee &
Snacks:
2.1) Industry Overview and Analysis:
Starbucks primarily operates and competes in the retail coffee
and snacks store industry. This industry
experienced a major slowdown in 2009 due to the economic
crisis and changing consumer tastes, with the
industry revenue in the US declining 6.6% to $25.9 billion.
Before this, the industry had a decade of growth
consistent. Due to the economic slump, consumers spent less on

luxuries like eating out, choosing to purchase
low-price items instead of high-priced coffee drinks due to
shrinking budgets.
3
The industry grew at a low
annualized average growth rate of 0.9% from 2008 till 2013
with current industry revenues at $29 billion in the
US. The industry is now forecasted to grow at an annualized
rate of 3.9% over the next five years, with a potential
to reach $35.1 billion revenues in the US. This growth would be
mainly driven by an improving economy,
increase in consumer confidence and expanding menu offerings
within the industry. Starbucks dominates the
industry with a market share of 36.7%, Dunkin Brands with
24.6% and other competitors like McDonalds, Costa
Coffee, Tim Horton’s etc. taking the rest as shown in Appendix
1.
4
2.2) Industry Life Cycle and Market Share Concentration:
This industry is in a mature stage with a medium level
concentration. Starbucks and Dunkin Brands make up
more than 60% of the market share (Appendix 1), giving them
considerable market power in determining industry
trends. Industry Structure is given in Appendix 3.

2.3) Industry Demand Determinants and Profitability Drivers:
The industry’s demand for premium coffee and snack products
are mainly driven by a number of factors which
include disposable income, per capita coffee consumption,
attitudes towards health, world pricing of coffee and
demographics. This industry is highly sensitive to the
macroeconomic factors that affect the growth in household
disposable. During the recession, the decline in household
disposable income due to increased unemployment and
stagnant wages, caused a downward pressure on the revenue and
profitability margins in the industry. Another
crucial factor for analyzing the demand in the industry is the per
capita coffee consumption where the increase in
coffee consumption increases the revenue of coffee & snack
shops. The main driver of this consumption increase
would be the increase disposable income, as the economy
improves and consumers start to relax their budgets.
This driver has a positive effect on market revenue. Per capita
coffee consumption is expected to increase in 2014.
As coffee beans are the primary input in the value chain of the
industry participants, the prevailing volatile prices

of coffee beans determines market costs and profitability
margins. The world price of coffee has risen sharply in
recent years due to growing demand in other countries and the
resulting supply shortages. During the five years to
2018, coffee bean prices are projected to decrease, which will
likely translate into lower market costs and higher
profitability.
5
Attitudes towards health also play an important role in
determining the demand in the industry.
There is an expected shift towards healthy eating and diet
among the consumers in 2014, and this could be a
potential threat to the industry as they become more aware of
issues related to weight and obesity. There has been
a proactive shift among the industry participants to tailor their
menus towards more organic and healthy products
mix.
2.4) Porters Five Forces Analysis of the Retail Coffee and
Snacks Industry:
Threat of New Entrants: Moderate

as the barriers to entry are not high enough to
discourage new competitors to enter the market. (Appendix 2
shows Barriers to Entry Checklist).
monopolistic competition structure.
tment is not significant as
they can lease stores, equipment etc. at a moderate
level of investment.
likes of Starbucks and Dunkin Brands because
there are no switching costs for the consumers. Even thought
it’s a competitive industry, the possibility of new
entrants to be successful in the industry is moderate.
countered by large incumbent brands identities like
Starbucks who have achieved economies of scale by lowering
cost, improved efficiency with a huge market
share. There is a moderately high barrier for the new entrants as
they differentiate themselves from Starbuck’s
product quality, its prime real estate locations, and its store
ecosystem ‘experience’.
6
scope, yielding them a learning curve advantage
and favorable access to raw material with the relationship they
build with their suppliers.

xpected retaliation from well-established companies for
brand equity, resources, prime real estate
locations and price competition are moderately high, which
creates a moderate barrier to entry.
Threat of Substitutes: High
substitute beverages to coffee,
which are mainly tea, fruit juices, water,
soda’s, energy drinks etc. Bars and Pubs with non/alcoholic
beverages could also substitute for the
social experience of Starbucks
roduced coffee
with household premium coffee makers
at a fraction of the cost for buying from premium coffee
retailers like Starbucks.
to substitutes, which makes the threat
high.
its important to note that industry leaders like Starbucks
are currently trying to counter this threat
by selling coffee makers, premium coffee packs in grocery
stores but this threat still puts pressure their
the margins.
Bargaining Power of Buyers: Moderate to Low Pressure

buyer can demand price concession.
consumer base, which make relatively low
volume purchases, which erodes the buyer’s power.
availability of substitute products, industry
leaders like Starbucks prices its product mix in relation to rivals
stores with prevailing market price
elasticity and competitive premium pricing.
retailing as they pay a premium for higher
quality products but are watchful of excessive premium in
relation product quality.
Bargaining Power of Suppliers: Low to Moderate Pressure
beans and premium Arabica coffee grown
in select regions which are standard inputs, which makes the
cost of switching between substitute
suppliers, moderately low.
advantage of its suppliers but it maintains a Fair trade
certified coffee under its coffee and farmer equity (C.A.F.E)

program, which gives its suppliers a fair
partnership status, which yields them some moderately, low
power.
7
competing against Starbucks by forward vertical
integration, which lowers their power.
highly important part of the suppliers
business, due its size and scope, which make the
power of the suppliers lower. Given these factors, suppliers
pose a moderately low bargaining power.
Intensity of Competitive Rivalry: High to Moderate
ustry has a monopolistic competition, with Starbucks
having the largest markets share and its closest
competitors also having a significant market share, creating
significant pressure on Starbucks.
competitors, which crates high intensity in rivalry.
competitive advantage as it differentiates its products
with premium products and services, which cause a moderate
level of intensity in competition.
low which cause the intensity of competition
among the companies to be moderately high due to all of them
seeking to increase market shaper from

established firms like Starbucks.
s industry does not have over capacity currently and all
these factors contribute to the intensity among
rivals to be moderately high.
Looking at the Porters five forces analysis, we can get an
aggregate industry analysis that the strength of forces
and the profitability in the retail coffee and snacks industry are
Moderate.
3) Internal Analysis of Starbucks Corporation:
3.1) Starbucks Core Competence:
The core competence of Starbucks has been its ability to
effectively leverage their cornerstone product
differentiation strategies by offering a premium product mix of
high quality beverages and snacks. Starbuck’s
brand equity is built on selling the finest quality coffee and
related products, and by providing each customer a
unique “Starbucks Experience”, which is derived from supreme
customer service, clean and well-maintained
stores that reflect the culture of the communities in which they
operate, thereby building a high degree of

customer loyalty with a cult following. Its other core
competence is its human resource management's values-
based approach for building very strong internal and external
relationships with suppliers, which drives the
successful deployment of its business strategy of organic
expansion into international markets, horizontal
integration through smart acquisitions and alliances that
maintains their long-term strategic objective being the
most recognized and respected brands in the world.
3.2) Starbucks SWOT Analysis:
Strengths:
Position and Global Brand Recognition:
Starbucks has a significant geographical presence
across the globe and maintain a 36.7% market share in the
United States (Appendix 1) and has operations in
over 60 countries. Starbucks is also the most recognized brand
in the coffeehouse segment and is ranked 91
st
in
the best global brands of 2013.
8
Starbucks effectively leverages its rich brand equity by
merchandizing
products, licensing its brand logo out. Such strong market

position and brand recognition allows the company
to gain significant competitive advantage in further expanding
into international markets and also help register
higher growth in both domestic and international markets. Over
the years, they have achieved significant
economies of scale with superior distribution channels and
supplier relationships.
importance to the quality of their products and avoid
standardization of their quality even for higher production
output.
9
stores in some of the most prime and strategic
location across the globe. They target premium, high-traffic,
high-visibility locations near a variety of settings,
including downtown and suburban retail centers, office
buildings, university campuses, and in select rural and
off-highway locations across the world.
10
This has earned them a significant competence and advantage

to be
able to penetrate prime markets and tap into customers convince
factor. Their stores are visually appealing and
have a ‘cool’ factor attached to it with being designed to reflect
the unique character of the neighborhood they
serve in and environmentally friendly. They provide free wifi,
great music, great service, warm atmosphere
and provide an environment of community meeting spot, which
forms a wider part of the ‘Starbucks
Experience’. The main aim for the firm is to make their stores a
‘third place’ besides home and work.
11
highly knowledge base employees. They are the
main assets of the company and they are provided with great
benefits like stock option, retirement accounts
and a healthy culture. This effective human capital management
translates into great customer services. It was
rated 91
st
in the 100 best places to work for by Fortune Magazine.
12

Initiatives: Their stores are community friendly,
focused on recycling and reducing waste. They build goodwill
among communities where they operate.
13
Appendix 8, that caters to all age groups
demographic factors.
14
leverages technology with its mobile application
“Starbucks App’ in both apple and android software’s. They
make significant investments in technology to
support their growth every year.
15
among consumers and they have also implemented
loyalty-based programs to drive loyalty with the Starbucks
Rewards programs and Starbucks Card. The
Starbucks Card is a value card program that provides
convenience, support gifting, and increase the frequency
of store visits by cardholders and integrated with their mobile
application.
16
Weaknesses:

products with being highly quality couple with
the whole ‘Starbucks Experience’, in times of economic
sluggishness, consumers to have so switching costs to
competitor’s products with lower prices and forgo paying a
premium. These premium prices could also pose
some weakness for it to succeed in developing countries.
-Cannibalization through overcrowding: By aggressive
expansion and high saturation due to overcrowding
in the market leads to self cannibalization and diminishes long
term growth targets of Starbucks. This is
happening especially in the United States where Starbucks
operates 8078 stores.
17
self-cannibalization of the US market with 8078
stores, Starbucks generates a huge percentage of their total
revenue from the US and this makes it very
sensitive to prospects of the US economy and growth.
Starbucks does come under increased scrutiny
and have to invest in corporate social responsibility activates
and maintain tight control over labor practices.
countries: Starbucks coffee culture may not widely
accepted in some countries as part of their international

expansion strategy.
Opportunities:
and self-cannibalization of the US market makes its
international strategy even more important. Starbucks has made
good inroad into many countries, with India
recently joining the list with a joint venture entry.
18
Starbucks has a great growth potential in further expanding
into the emerging and developing markets. They can leverage
their size, experience, financial prowess and
efficiencies to make new market share.
19
started to expand their product mix by venturing into
the Tea and fresh juice product offerings with a smart
acquisition strategy.
20
This provides significant
opportunities for Starbucks.

packed coffee products, iced beverages and
merchandizes through large box retailers. This market’s
potential is yet to be fully realized and this provides
Starbucks great opportunities for the future to future monetizes
their brand.
mobile applications and has an investment
partnership with Square, a mobile payments app that is
integrated with its Starbucks app. This creates an ease
of use process for customers, aligns customer loyalty through
reward programs. Starbucks has already set the
bar in the industry with this advancement and about 10% of its
transactions in the US have been made using
mobile applications.
21
This is a growing field and would drive more business to their
stores as technology
advances.
version of a delivery system called Mobile Pour. This
presents a great opportunity for the future by expanding their
end product distribution systems and could drive
more revenue if the implementation is successful.
22

and it can leverage it to extend into horizontal lines
of its business and also venture into product diversification with
keeping brand dilution risk in check.
Threats:
Starbucks faces with the market being at a mature
stage, there is increased pressure on Starbucks from its
competitors like Dunkin Brands, McDonalds, Costa
Coffee, Pete’s Coffee, mom and pop specialty coffee stores.
Dunkin Brands had at its main threat in the US
market by trailing Starbucks with a 24.6% share. (Appendix 1)
significant fluctuations in the market prices of high
quality coffee beans, which Starbucks can’t control.
Starbucks derives a
significant amount of its revenue from the
development markets and there is increased market saturation
currently.
economically integrated world, an economic crisis like the
one in 2008 could have a trickle down effect from the developed
markets to the developing markets. This
threat would hurt revenues for Starbucks as consumers shift
away from premium product mix to stay in limited

budgets during economic hardships.
ing Consumer tastes and lifestyle choices: The shift of
consumers toward more healthy products and the
risk of coffee culture being just a fad represent a threat for
Starbucks going into the future.
3.3) Starbucks Generic Value Chain: Analysis in Appendix 6
3.4) Starbucks VRIO Analysis: Shown in Appendix 4. The
VRIO framework is used to analyze in detail the
competitive position of Starbucks Corporation and its strategic
positioning.
3.3) Starbucks Key Strategies:
One of the key strategy that Starbucks followed since its
inception is that of product differentiation offering
differentiators such as premium product mix, locations, coffee
beverages reputation and supreme customer service
that translated to building a premium valued brand which is
costly to imitate for competitors. Starbucks has also
followed a shrewd strategy of strategic alliance and making
smart acquisitions. Starbucks didn’t follow
franchising model and operated company oriented stores and
joint ventures in international markets. Starbucks

has made some key acquisitions such as Teavana (Tea
products), Bay Breads (premium bread products),
Evolution Fresh (fresh juice products) etc. to use the product
diversification strategy. Appendix 7 gives a whole
list of joint ventures, strategic alliances and acquisitions of
Starbucks. Starbucks acquisition strategy, as shown in
their acquisition history in Appendix, has been horizontal,
product and market extensions acquisitions. Another
crucial strategy for Starbuck’s growth has been its international
strategies of expanding into key developed and
emerging markets to geographically diversify, and it has been
highly successful with operation spanning 60
countries. All these strategies have derive considerable
competitive advantage for Starbucks over its competitors.
3.6) Starbucks Financial Performance Analysis:
Looking at a six year period ratio & growth analysis of
Starbucks’s financials from 2008 to 2013, we can see that
the revenue growth of the company has experience a drop of -
5.9% during the 2008/09 recession but from then

on, Starbucks posted a healthy revenue growth of from FY2010
to FY2013 with posting a great growth of 13.7%
in FY2012 and currently posted revenues $14.9 billion for
FY2013. The operating income margins have increase
substantially from 4.9% in FY2008 to a high of 15% in FY2012.
Starbucks posted an operating loss in FY2013
and this resulted in a operating margin of -2.2% for that year
and the main reason for that is due to a litigation
charge of $2.8 billion to Kraft Foods for terminating an
agreement with them. This charges is treated as
extraordinary event and therefore should be discounted from the
overall healthy operational performance of
Starbucks. Starbucks ROE and ROA have been impressive with
29.2% and 17.8% respectively for FY2012.
Looking at Starbucks efficiency ratios, Starbucks has gained
significant operational efficiency with impressive
asset and inventory turnover ratios with a low of 1.51 and 5.4
respectively for FY2013. But its interesting to note
that the company’s cash conversion cycle has increase to high
54.7 in FY2013, which is where Starbucks should
concentrate on to reduce to attain higher efficiency. Starbucks
boasts good financial health with low debt/leverage
with a debt/equity ratio of 0.29 for FY2013 and maintains
decent current and quick ratios. A detailed financial

ratio and growth calculations are given in Appendix 5.
4) Recommendations:
emerging markets of Brazil, India,
China, South Africa and Mexico with a growing middle-class
population continue to offer significant
opportunities to add new stores and serve more customers.
Starbucks has already made significant
inroads into the Chinese market but there still is a lot of
untapped potential growth in these markets.
Starbucks should grow in these emerging markets by winning
locally Starbucks must remain relevant
to the customer in order to grow in these markets, and its
management teams should have the freedom
to operate within their overall framework to tailor store format,
introduce local product mix and price
points to the needs, lifestyles and tastes of each individual
market/community.
core competencies and capabilities
country to country and then gradually build profit drivers in
several countries as it continues its global
expansion in an organic way.

Juice products mix. They should build up these
products along the same line of their core coffee products.
snacks and beverages options, Starbucks should
tailor its menu’s and expand to give more healthy product
offerings in its mix.
chain and there have been wide fluctuations in the
market prices of high quality coffee beans. Starbucks could
mitigate this price volatility risky by
implementing an effective hedging strategy like future contracts
to lock in their estimated quantity inputs at a
low swing price so that the future costs can be managed to a
greater extent.
focus on getting additional penetration into
untapped rural markets.
beverage products. Starbucks should build
better relationships with big box retailers to get premium shelf
space and increase the efficiency of this
distribution channel.
-K’s, we can see that Starbucks invest very
little in advertising and marketing initiatives. It
would be recommended that Starbucks make significant
investments in advertising and marketing initiatives

in the face of increased competition in the market.
concept of on-the-go home delivery.
so it would be recommended for further
building to stream lining ease of use and payment process which
would help drive more customers, decrease
wait time in stores and increase efficiency. Integrating
Starbucks loyalty program with the mobile application
would also be recommended.
References:
1
Starbucks 2013 10-K Form for FY ended on September 29th,
2013
2
2013
3
IBIS World: The Coffee & Snack Shop Industry in the US
Report, October 2013
4

5
6
http://www.starbucks.com/about-us/company-
information/mission-statement
7
http://www.starbucks.com/responsibility/sourcing/coffee
8
http://interbrand.com/en/best-global-brands/2013/Starbucks
9
Starbucks 2013 10-K Form for FY ended on September 29
th
, 2013
10
th
, 2013
11
http://www.starbucks.com/coffeehouse/store-design
12
http://money.cnn.com/magazines/fortune/best-
companies/2013/snapshots/94.html
13

http://www.starbucks.com/responsibility/community
14
GlobalData: Starbucks Corporation Research Report, March
2013
15 http://blogs.wsj.com/corporate-
intelligence/2013/07/26/starbucks-talks-about-its-future-more-
food-more-digital/
16
th
, 2013
17
th
, 2013
18
http://online.wsj.com/article/PR-CO-20131122-905464.html
19
http://www.forbes.com/sites/walterloeb/2013/01/31/starbucks-
global-coffee-giant-has-new-
growth-plans/
20
http://seekingalpha.com/article/637841-starbucks-smart-
acquisition-strategy
21

http://techcrunch.com/2013/07/26/mobile-payment-at-u-s-
starbucks-locations-crosses-10-as-
more-stores-get-wireless-charging/
22
http://www.starbucks.com/blog/introducing-starbucks-mobile-
pour
23
2013
Supplementary Sources:
http://www.mckinsey.com/insights/growth/starbucks_quest_for_
healthy_growth_an_interview_
with_howard_schultz
http://www.forbes.com/sites/walterloeb/2013/01/31/starbucks-
global-coffee-giant-has-new-
growth-plans/
http://seattletimes.com/html/businesstechnology/2020031178_st
arbucksteavanaxml.html

healthy_growth_an_interview_with_howard_schultz
healthy_growth_an_interview_with_howard_schultz
Appendix 1: US Coffee and Snacks retail market share
Source: IBIS World Report
Appendix 2: Barriers to Entry Checklist
Appendix 3: Industry Structure

Appendix 4 continued next page…
Appendix 4: Detailed VRIO Analysis of Starbucks Corporation
Resources and Capabilities of Starbucks Corporation Value?
Rare? Costly to
Imitate?
Exploited? Competitive
Implication
Prime and Strategic Locations:
-traffic, high-visibility locations near a variety of
settings, including downtown and suburban retail centers,
office buildings, university campuses, and in select rural and
off-highway locations across the world.

Yes
Yes
No
Yes
Temporary
Competitive
Advantage
Global Brand Recognition & Equity
ranked 91
st
in the best global brands of 2013
products, licensing its brand.

Yes
Yes
Yes
Yes
Competitive
Advantage
Aesthetic Appeal and Concepts of its Stores
ve a ‘cool’ factor
attached to them.
atmosphere
and provide an environment of community meeting spot, which
forms a wider part of the ‘Starbucks Experience’.
third place’ besides home
and
work.
they serve in and environmentally friendly.

Yes
Yes
Yes
Yes
Competitive
Advantage

Large Size and Strong Global Presence
and
supplier relationships
Yes
Yes
Yes
Yes
Temporary
Competitive
Advantage
Human Resource Management and Company Culture
retirement
accounts and well taken care of

culture
k for by Fortune
Magazine
culture translates into supreme customer service
Yes
Yes
Yes
Yes
Competitive
Advantage
Leveraging Technology and Mobile Outlets
Apps on iOS and Android

Yes Yes No Yes Temporary
Competitive
Advantage
Customer Loyalty and Cult Status
-based programs like Starbucks Rewards and
Starbucks
Card drive loyalty.
convenience, support gifting, and increases the frequency of
store visits by cardholders
Yes
Yes
Yes
Yes
Competitive

Advantage
Good Corporate Social Responsibility Image
and
reducing waste.
Yes
Yes
No
Yes
Temporary
Competitive
Advantage

Appendix 5: Starbucks Corporation’s Financials
Starbucks Corporation's Financials for Fiscal Year ending
September of each year (All USD figures in millions)
Key Ratio's/Accounts FY 2008 FY 2009 FY 2010 FY 2011 FY
2012 FY 2013
Profitability Ratio's
Revenue 10,383 9,775 10,707 11,700 13,300 14,892
Gross Margin % 19.2 55.8 58.4 57.7 56.3 57.1
Operating Income (USD Millions) 504 562 1,419 1,729 1,997 -
325
Operating Income Margin % 4.9 5.7 13.3 14.8 15 -2.2
Net Income (USD Millions) 316 391 946 1,246 1,384 8
Net Margin % 3 4 8.8 10.7 10.4 0.06
Return on Equity (ROE) % 13.2 14.1 28.14 30.9 29.2 0.17
Return on Assets (ROA) % 5.73 7 16 18.1 17.8 0.08
Earnings Per Share (EPS) 0.43 0.52 1.24 1.62 1.79 0.01
Efficiency Ratio's

Asset Turnover 1.89 1.74 1.79 1.7 1.71 1.51
Inventory Turnover 12.1 6.4 7.4 6.6 5.3 5.4
Fixed Asset Turnover 3.5 3.5 4.3 4.9 5.3 5
Days Sales Outstanding 10.9 11.2 9.8 10.75 12 12.8
Days Inventory 30.11 57.3 49.4 55.6 69.3 67.3
Payable Period 15.6 25 22.5 30.3 29.4 25.4
Cash Conversion Cycle 25.4 43.5 36.7 36.1 52 54.7
Liquidity & Financial Health Ratio's
Current Ratio 0.8 1.3 1.55 1.83 1.9 1.02
Quick Ratio 0.3 0.6 1 1.17 1.14 0.71
Debt/Equity 0.22 0.18 0.15 0.13 0.11 0.29
Financial Leverage 2.28 1.83 1.74 1.68 1.61 2.57
Year on Year Growth %
Revenue Growth % 10.3 -5.9 9.5 9.3 13.7 12

Source: All Financials used here are derived from Starbucks10-
K Form for Fiscal Years ended
2008, 2009, 2010, 2011, 2012, and 2013
Appendix 6: Starbucks Generic Value Chain:

Primary activities
Inbound logistics – Sourcing coffee from diverse coffee beans
producers with whom they have great
relationships and built up efficient supply chain management
system.
Operations – They have operation in 60 countries with their
stores being modeled on company operated
stores and licensed stores.
Outbound logistics – Most of its product mix are sold in-store
and some through large box retailers.
Payment around source through point of sale, prepaid Starbucks
Cards and mobile payments.
Marketing and Sales – Traditionally, investment in marketing
activities have not be significant and relied
mainly on the growing reputation of premium quality product
mix and superior customer services to give
the ‘Starbucks Experience’ to drive customers to their stores
and products.
Service - Starbucks has a reputation for providing supreme level
of customer services to their consumers.

Support activities
Firm Infrastructure. They have well designed, aesthetically
pleasing stores. They have efficient level of
finance, accounting and legal departments to support the firm’s
infrastructure.
Human Resource Management – Great benefits, employee
empowerment and amazing corporate culture
makes Starbucks drive efficient management of human capital.
Technology development – Investments in innovative
technologies like the well like mobile app.
Procurement – Starbucks procures its products from a diverse
group of supplier and has fixed contracts
with some of the suppliers.
23
Appendix 7: History of Strategic Acquisition, Joint Venture,
Strategic Alliances
and Product Extensions

Continued next page…
Source: Global Data and MarketLine Financial Deals, Starbucks
Corporation, 2013 Reports.
Continued next page…

Appendix 8: List of Starbucks Product Mix:

Source: GlobalData and Starbucks Website
Source: GlobalData and Starbucks Website
328 1 Herbert]. Gons
dysfunctional for the affluent members of society. A functional
analysis thus
ultimately anives at much the same conclusion as radical
sociology, except that
radical thinkers treat as manifest what I describe as latent: that

social phenom-
ena that are functional for aftlnent or powerful p u p s and
dysfunctional for
poor or powerless ones persist; that when the elimination of
such phenomena
through functional alternatives would generate dysfunctions for
the affluent or
powerful, they will continue to persist; and that phenomena like
p o v e q can
be eliminated only when they become dysfunctional for the
affluent or power-
ful, or when the paverless can obtain enough power to change
society.
Postscript
Over the yean, this article has been intelpreted as either a direct
attack on
functionalism or a tongue-in-cheek satirical comment on
it%either intelpre-
tation is Due. I wrote the article for two reasons. First and
foremost, I wanted
to point out that there are, u n f o h a t e l y , positive functions
of poverty which
have to be dealt with by antipoverty policy. S e ~ n d , I was
trying to show that
functionalism is not the inherently conservative approach for
which it has
often been criticized, but that it can he employed in liberal and
radical
analyses.
31 Savage Inequalities
JONATHAN KOZOL
Socid inequality so pelvades our society that it leaves no area of

life
untouched. Consequently, because we are immersed in it, we
usually
take social inequality for granted. When social inequality does
become
vbible to us, itssocinl ofigins often disappear from sight. We
tend to
see social inequality as part of the mtuvd ordeling of liferaften
ex-
plaining it on the'hasis of people's individual chmcteristi5s.
("The)"
are IzAer, dumber, less moral-or whatever-than nthorhers.
That's the
reason they have less than we do.) This selection, however,
makes the
sociol base of social inequality especially vivid.
To examine the U.S.educational +em. Kozol haveled mund the
counq and ohsewed schools in pow, middle-cllasr,and
+mmmuni-
ties. Because schoals are financed largely by local property
taxes, wealth-
ier mrnmunities am able to offer higher salaries and a t h a d
more
qualified teachers, offer more specialized and advanced murses,
pur-
chase newer texts and equipment, and thereby their children
better education. The extent of the disparitjes, however, is much
greater
than most people &. As you read about.the tpg rchgds ~nrrasted
in this selectiah hy to project yourself intn each s i W n . Haw
da you
think that living in these communities and being a sbdent in
these
schools would likely affect you-not only what you ]em, hut also
your

viewson life, as well as ynur entire future?
"EASTOF ANYWHERE," wites a reporter for the St. h i s Post-
m a t c h , "often evokes the other side of the tracks. But, for a
k t - t i m e visitor
suddenly deposited on its eerily empty streets, East St. Louis
might suggest
another world." The city, which is 98 percent black, has no
obstetric services,
no regular trash collection, and tew lobs. Nearly a third of its
families live on
less than $7,500 a year; 75 percent ofits population lives on
welfare of some
form. The U.S. Department of Housing and Urban Development
describes it
as "the most distressed small city in America."
Only three of the 13 buildings on Missouri Avenue, one of the
city's
major thoroughfares, are occupied. A 13-story office building,
tallest in the
city, has been boarded up. Outside, on the sidewalk, a pile of
garbage fills a
ten-fwt crater.
The city, which by night and day is clouded by the fumes that
pour from
vents and smokestacks at the Pfizer and Monsanto chemical
plants, has one of
the highest rates of child asthma in America.
It is, according to a teacher at Southern Illinois University, "a
repositoly

for a nonwhite population that is now regarded as expendable."
The Past-
Dispatch describes it as "America's Soweto."
Fiscal shortages have forced the layoff of 1,170 of the city's
1,400 employ-
ees in the past 12 years. The city, which is often unable to buy
heating fuel or
toilet paper for the city hall, recently announced tllat it might
have to cashier
all but 10 percent of the remaining work force of 230. The
mayor announced
that he might need to sell the city hall and all six fire stations to
raise needed
cash. Last year the plan had to he scrappedafter the city lost its
city hall in a
court judgment to a creditor. East S t Louis is mortgaged into
the next century
hut has the highest property-tax rate in the state. . . .
The dangers of exposure to raw sewage, which backs up
repeatedly into the
homes of residents in East St. Louis, were first noticed at a
public housing pro-
ject, Villa Griffin. Raw sewage, says the Part-Dispatch,
overflowed into a play-
ground just behind the housing project, which is home to 187
children, "forming
an o o d g lake o f . .. tainted water.". . . A St. Louis health
official voices her dis-
may that children live with waste in their hac!yrds. 'The
development of work-
ing sewage systems made cities livable a hundred yean ago,"
she notes. "Sewage
'

systems separate us from the Third World." . . .
The sewage, which is flowing from collapsed pipes and
dysfunctional
pumping stations, has also flooded basements all over the city.
The city's vac-
uum truck, which uses water and suction to unclog the city's
sewers, cannot be
used because it needs $5,000 in repairs. Even when it works, it
sometimes
can't be used because there isn't mo;ey to hire driven. A single
engineer now
does the work that 14 others did before they were laid off. By A
p d the pool of
overflow behind the ViUa Griffin project has expanded into a
lagoon of
sewage. Two million gallons of raw sewage lie outside the
children's homes. . . .
. .. Sister Julia Huiskamp meets me on King Boulevard and
drives me to
t h e Griffn homes.
As we ride past blocks and blocks of skeletal structures, some
of which
a r e still inhabited, she slows the car repeatedly at railroad
crossings. A seem-
ingly endless railroad train rolls past us to the right. On the left:
a blackened
lot where garbage has been burning. Next to the burning
garbage is a row of
12white cabins, charred by fire. Next: a lot that holds a heap of
auto tires and
a mountain of tin cans. More burnt houses. More bash h s . The
train moves
almost imperceptibly across the flatness of the land.

Fifty years old, and wearing a blue suit, white blouse, and blue
head-
cover, Sister Julia points to the nicest house in sight. The sign
on the front
reads MOTEL. "It's a whorehouse: Sister Julia says.
When she slows the car beside a group of teen-age boys, one of
them
steps out toward the car, then backs away as she is recognized.
The 99 units of the Villa Griffin homes-two-story structures,
brick on
Savage loequalities 1 331
the first floor, yellow wood ahov-fonk one border of a recessed
park and
playground that were Elled with fecal matter last year when the
sewage mains
exploded. The sewage is gone now and the grass is very green
and look invit-
ing. When nine-year-old Serena and her seven-year-old hrother
take me for a
walk, however, I discover that our shoes sink into what is still a
sewage marsh.
An inch-deep residue of fouled water stiU remains.
Serena's hrother is a handsome, joyous little boy, hut
trouhlingly thin.
Three other children join us as we walk along the marsh:
Smokey, who is nine
years old hut cannot yet tell time; Mickey, who is seven; and a
tiny child with a
ponytail and big brown eyes who t a l h a constant stream of
words that I can't

always understand.
"Hush, Little Sister," says ereQ. I ask for her name, but "Little
Sister" is
the only name the children seem to know.
"There go my cousins," Smokey says, pointing to two teen-age
girls above
us on the hill.
The day is w m , although we're only in the second week of
March: sev-
eral dogs and cats are playing by the edges of the marsh. "It's a
lot of squirrels
here," says Smokey. 'There go one!"
"This here squirrel is a friend of mine," says Little Sister.
None of the children can tell me the approximate time that
school begins,
One says five o'clock. One says six. Another says that school
begins at noon.
When I ask what song they sing after the flag pledge, one says,
"Jingle
Bells "
Sm ke cannot decide if he is in the second or third grade. @-
year-old Mickey sucks his thumb duringthe walk.
The children regale me with a chilling s t o v as we stand
beside the marsh.
Smokey says his sister was raped and murdered and then
dumped behind his
school. Other children add more details: Smokey's sister was 11
years old. She
was beaten with a brick until she died. The murder was

committed by a man
who knew her mother.
The narrative begins when, without warning, Smokey says, "My
sister has
got Idled.''
"She was my best friend," Serena says.
"They had beat her in the head and raped her," Smokey says.
"She was hollering out loud," says Little Sister.
I ask them w g n it happened. Smokey says, .Last year." Serena
then cor-
rectshim and sh&ays, "Last week."
"It scared me because I had to cry," says Little Sister.
"The police arrested one man but they didn't catch the other,"
Smokey
says.
Serena says, "He was some idn to her."
But Smokey objects, "He weren't no idn to me. H e was my
momma's
friend."
"Her face was busted," Little Sister says.
Serena describes this sequence of events: "They told her go
behind the
school. They'll give her a quarter if she do. Then they h o c k
her down and
told her not to tell what they had did."
I ask, 'Why did they M her?"
"They was scared that she would tell," Serena says.

"One is in jail," says Smokey. "They cain't find the other."
"Instead of raping little hitty children, they should find
themselves a
wife," says Little Sister.
"I hope," Serena says, "her spirit will come back and get that
man."
"And kill that man," says Little Sister.
"Give her another chance to live," Serena says.
-My teacher came to the funeral," says Smokey.
'When a little child dies, my momma say a star go straight to
Heaven,"
says Serena.
"My grandma was murdered," Mickey says out of the blue.
"Somebody
shot two bullets in her head."
I askhm, "Is she really deadBY.
"She dead all right," say? Mickeyi "She was layin' there, just
dead."
"I love my friends," Ser&a say! "I don't care if they no k n to
me. I care
for them. I hope his mother have another baby Name her for my
friend that's
dead."
"I have a cat with three legs," Smokey says.
"Snakes hate rabbits," Mickey says, again for no apparent
reason.
"Cats hate fishes," Little Sister says.
"It's a lot of hate," says Smokey.
Later, at the mission, Sister Julia tells me this: "The Jefferson
School,

which they attend, is a decrepit hulk. Next to it is a modem
school, erected two
years ago, which was to have replaced the one that they attend.
But the con-
struction was not done correctly. The roof is t m heavy for the
walls, and the en-
tire structure has begun to sink.It can't he occupied. Smokey's
sister was raped
and murdered and dumped between the old school and the new
one." . ..
The problems of the streets in urban areas, as teachers often
note, fre-
quently spill over into public schools. In the public schools of
East St. Louis
this is literally the case.
"Martin Luther King Junior High School," notes the Post-
Dispatch in a
story published in the early spring of 1989, "was evacuated
Friday afternoon
after sewage flowed into the idtchen. . . . The kitchen was
closed and stn-
dents were sent home." On Monday, the paper continues, "East
St. Louis
Senior High School was awash in sewage for the second time
this year." The
school had to be shut because of "fumes and backed-up toilets."
Sewage
flowed into the basement, through the floor, then up into the
kitchen and
t h e students' bathrooms. The backup, we read, "occurred in
the food prepa-
ration areas."
School is resumed the foUowing morning at the high school, but

a few
Savage inequalities I 333
days later the overtlow recurs. This time the entire system is
affected, since
the meals distributed to evely student in the city are prepared
the two
schools that have been flooded. School is called off for all
16,500 students in
the district. The sewage backup, caused by the failure of two
pumping sta- . ~
rirjns, lirrre, orrsials nr rhc laiel~ school o, slllrr down tile
filtnacrf.
.It lunll Lurhtr King, t h r : pnrking lot d a dF n l arr ~ 1 9
0floodrd. "It's a
disaster," says a legislator. "The streets are under water;
gaseous fumes are
being emitted from the pipes under the schools," she says,
"making people iU."
In the same week the schools announce the layoff of 280
teachers, 166
cooks and cafeteria workers, 25 teacher aides, 16 custodians and
18 painters,
electricians, engineers and plumbers. The president of the
teachers' union
says the cuts, which will bring the size of ldndergarten and
primary classes up
to 30 students, and the size of fourth to twelfth grade classes up
to 35, will
have "an unimaginable impact" on the students. "If you have a
high s c h ~ o l
teacher with five classes each day and between 150 and 175
students . . . , it's

going to have a devastating effect." The school system, it is also
noted, has
been using more than chers," who are paid only
$10,000 yearly, as a
East St. Louis, says the chairman of the state board, "is simply
the worst
possible place I can imagine to have a child brought up. . . . The
community is
in desperate circumstances." S p o ~ t s and music, he observes,
are, for many
children here, "the only avenues of success." Sadly enough, no
matter how it .
ratifies the stereotype, this is the truth; and there is a poignant
aspect to the
fact that, even with class size soaring and one quarter of the
system's teachers
being given their dismissal, the state hoard of education
demonstrates its gen-
uine but skewed compassion by attempting to leave sports and
music nn-
touched by the overall austerity.
Even sports facilities, however, are degrading by comparison
with those
found and expected at most high schools in America. The
football field at East
St. Louis High is missing almost everything-including pa .
There a? a
couple of metal pipes-no crossbar, just the pipes. B Shann
coach, who has to use his personal funds to purchase Q,the
football o s and has had to
cut and rake the football field himself, has dreams of having
goalposts some-
day. He'd also like to let his students have new uniforms. The
ones they wear

are nine years old and held together somehow by a patchwork of
repairs.
Keeping them clean is a problem, too. The school cannot afford
a washing ma-
chine. The uniforms are carted to a corner laundromat with
fifteen dollars'
worth of quarters. . . .
In the wing of the school that holds vocational classes, a damp,
unpleas-
ant odor fds the halls. The school has a machine shop, which
cannot be used
for lack of staff, and a woodworking shop. The only shop that's
occupied this
morning is the auto-body class. A man with long blond hair and
wearing a
white sweat suit swings a paddle to get children in their chairs.
'Wbat we need
the most is new equipment," he reports. "I have equipment for
alignment, for
Savage Inequalities I 335
example, but we don't have money to install it. We also need a
better form of
egress. We bring the cars in through two other classes."
Computerized equip-
ment used in most repair shops, he reports, is far beyond the
high school's
budget. It looks like a very old gas station in an isolated rural
town. . . .
The science labs at East St. Louis High are 30 to 50 years
outdated. John

McMillan, a soft-spoken man, teaches physics at the school. He
shows me his
lab. The six lab stations in the room have empty holes where
pipes were once
attached. "It would he great ifwe had water," says McMillau. . .
.
Leaving the chemistry labs, I pass a double-sized classroom in
which
roughly 60 ldds are sitting fairly still but doing nothing. "This
is supenised
study hall," a teacher tells me in the conidor. But when we step
inside, he
finds there is noteacher. "The teacher must be out today," he
says.
Irl Solomon's history classes, which I visit next, have been
described by
journalists who cover East St. Louis as the highlight of the
school. Solomon, a
man of 54 whose reddish hair is turning white, has taught in
urban schools for
almost 30 yead. A graduate of Brandeis University, he entered
law school hut
was drawn away by a concern wihckvil-rights. "After one
semester, I decided
that the law was not for me. I said, 'Go and find the toughest
place there is to
teach. See if you like it.' I'm still here. . . .
"I have four girls right now in my senior home room who are
pregnant or
have just had babies. When I ask them why this happens, I
am,told, Well,
there's no reason not to have a baby. There's not much for me in
public

school.' The truth is, that's a pretty honest answer. A diploma
from a ghetto
high school doesn't count for much in the United States today.
So, if this is re-
ally the last education that a person's going to get, she's
probably perceptive in
that statement. Ah, there's so much bitterness-unfairness-there,
you hav.
Most of these pregnant girls are not the ones who have much
self-esteem. . . .
''Very little education in the school would be considered
academic in the
suburbs. Maybe 10 to 15 percent of students an in truly
academic programs.
Of the 55 percent who graduate, 20 percent may go to four-yeir
colleges:
something like 10 percent of any entering class. Another 10 to
20 percent may
get some other ldnd of higher education. An equal number join
the military. . . .
"I don't go to physics class, because m f i b has no equipment,"
says one
student. 'The typewriters in my typing class don't work. The
women's
toilets . . . " She makes a sour face. "I'll he honest," she says. "I
just don't use
t h e toilets. If I do, I come back into class and I feel dirty."
"Iwanted to study Latin,; says another student. "But we don't
have Latin
in this school."
'We lost our onlp-Latin teacher," Solomon says.
A girl in a white jersey with the message DO THE RIGHT

THING on
t h e front raises her hand. 'You visit other schools," she says.
"Do you think the
childien in this school are getting what we'd get in a nice
section of St. Louis?"
I note that we are in a different state and c q ,
"Are we citizens of East St. Louis or America? she asks. . ..
In a seventh grade social studies class,the . . . teacher invites
me to ask
the class some questions. Uncertain where to start, I ask the
students what
they've learned about the civil rights campaigns of recent
decades.
A 14year-old girl with short black curly hair says this: "Every
year in
Febmary we are told to read the same old speech of Martin
Luther King. We
read it every year. 'I have a dream. . . . ' It does begin toseem-
what is the
word?" She hesitates and then she finds the word: 'perfunctory."
I'Hsk her what she means.
'We have a school in East St. Louis named for Dr. King," she
says. 'The
school is full of sewer water and the doors are locked with
chains. Evely stu-
dent in that school is black. It's like a temble joke on history."
It startles me to hear her words, hut I am startled even more to
think how

seldom any press reporter has observed the irony of naming
segregated
schools for Martin Luther King. Children reach the heart of
these hrpocrisies
much quicker than the grown-ups and the experk do. . . . ...
The &n ride from Grand Central Station to suburban Rye, New
York,
takes 35 to 40 minutes. The high school is a short ride from the
station. Built
of handsome gray stone and set in a landscaped campus, it
resembles a NF
England prep school. I enter the school and am directed by a
student to the
office.
The principal, a rel?xed, unhurried man who, unlike many urban
princi-
pals, seems gratified to have me visit in his school, takes me in
to see the audi-
torium, which, he says, was recently restored with private
charitable funds
($400,000) raised by parents. The crenellated ceiling, which is
white and spot-
less, and the polished dark-wood paneling contrast with the
collapsing struc-
ture of the auditorium at [another school I visited]. The
principal strikes his
fist against the balcony: "They made this place exh.emely
solid." Through a
window, one can see the spreading branches of a beech tree in
the central
~ u r t y a r dof the school.
In a student lounge, a dozen seniors are relaxing on a c q e t e d

floor that
is constructed with a number of tiers so that, as the principal
explains, "they
can stretch out and he comfortable while reading."
The library is wood-paneled, like the auditorium. Students, all
of whom
are white, % seated at private carrels, of which there are
approximately 40.
Some are doing homework; others are looking through the New
York Times.
Every student that I see during my visit to the school is white or
Asian, though
I later learn there are a number of Hispanic students and that
1or 2 percent
of students in the school are black.
The typical student, the principal says, studies a foreign
language for four
or five years, beginning in the junior high school, and a second
foreign lan-
p a g e (Latin is available) for two years. Of 140 seniors, 92 are
now enrolled in
AP [advanced placement] classes. Maximum teacher salaq will
soon reach
$70,000. Per-pupil funding is above $12,000 at the time I visit.
The students I meet include eleventh and twelfth graders. The
teacher
tells me that the class is reading Robert Coles, Studs Terkel,
Alice Walker. He
tells me I will find them more than willing to engage me in
debate, and this

turns out to be correct. Primed for my visit, it appears, they n m
o w in directly
on the dual questions of equality and race.
Three general positions soon emerge and seem to h e accepted
widely.
The n t that the fiscal inequalities "do matter very much" in
shaping what a
schoo offer ('That isobvious: one student says) and that any loss
of funds @i?
in Rye, as a potential consequence of future equalizing, would
be damaging to
many thingsthe town regards as quite essential.
The econd osition is that racial integration-for example, by the
of black c n from the city or a nonwhite suburb to this school-
wou d
meet with strong resistance, and the reason would not simply be
the fear that
certain standards might decline. The reason, several students
say straightfor-
wardly, is "racial" or, as others say it, "out-and-out racism" on
the part of
adults.
r d . oslhon vo~ced by many students, hut not d,is +at equity is
Q Q
[email protected]?basically a go to 'be' deslred; and should be
pursued for moral reasons, hut
"will probably make no major difference" since poor children
"still would lack
the motivation" and "would fail in any case because of other
prob-

lems."
At this point, I ask if they can t d y say "it wouldn't make a
difference"
since it's never been attempted. Several students then seem to
rethink their
views and say that "it might work, but it would have to start
with preschool and
the e l e m e n q grades" and "it might h e 20 years before we'd
see a differ-
e ~ c e . "
At this stage in the discussion, several students speak with some
real feel-
ing of the present inequalities, which, they say, are "obviously
unfair," and one
student goes a little further and proposes that "we need to
change a lot more
than the schools." Another says she'd favor racial integration
"by whatever
means-including busing-ven if the parents disapprove." But a
contradic-
tory opinion also is expressed with a good deal of fervor and is
stated by one
student in a rather biting voice: "I don't see why we should do
it. How could it
be of benefit to us?
Throughout the discussion, whatever the views the children
voice, there
is a degree of unreality about the whole exchange. The children
are lucid and
their language is well chosen and their arguments well made,
hut there is a
sense that they are dealing with an issue that does not feel very
vivid and that

nothing that we say about it to eachother really matters since
it's 'just a theo-
retical discussion." To a certain degree, the skillfulness and
cleverness that
Savage Inequalities 1 337
they display seem to derive precisely from this sense of
unreality. Questions of
unfairness feel more like a geometric problem than a matter of
humanity or
conscience. A few of the students do break through the note of
unreality, hut,
when they do, they cease,to be so agde in their use of words and
speak more
awkwardly. Ethical challenges seem to threaten their
effectiveness. There is
the sense that they were skating over ice and that the issues we
addressed
were safely frozen underneath. When they stop to look beneath
the ice they
s M to stumble. The Gerhal competence they have acquired
here may have
been gained by building walls around some regions of the heart
"I don't think that busing students from their ghetto to a
different school
would do much good:' one student says. 'You can take them out
of the envi-
ronment, but you can't take the environment out of them. If
someone grows
up in the South Bronx, he's not going to be prone to learn." His
name is Max
and he has short black hair and speaks with confidence. -Busing
didn't work
when it was tried," he says. I ask him how he knows this and he

says he saw a
television movie about Boston.
',I agree that it's unfair the way it is," another student says. 'We
have AP
[Advanced Placement] courses and they don't. Our classes are
much smaller."
But, she says, "putting them in schools like ours is not the
answer. Why not
put some AP classes into their school? Fix the roof and paint
the halls so it d
not he so depressing."
The students h o w the term "separate hut equal,'' hut seem
unaware of
its historical associations. "Keep them where they are hut make
it equal," says
.a girl in the front row.
A student named Jennifer, whose manner of speech is somewhat
less re-
fined and polished than that of the others, tells me that her
parents came here
from New York. "My family is originally from the Bronx.
Schools are hell
there. That's one reason that we moved. I don't think it's our
responsibility to
pay our taxes to provide for them. I mean, my pe-e&ethere and
they wanted to get out. There's no point in c o m i s f o a
lace_&&where
schools are good, and then your t a x e ~ s ~ ~ ~ ~ c ; ~ ~ t h ~
p l ~ i % e r e you began."
I bait her a hit: "Do you mean that, now that you are not in hell,
you have

no feeling for the people that you left behind?"
"It has to be the people in the area who want an education. If
your par-
ents just don't care, it won't do any good to spend a lot of
money. Someone
else can't want a good life for yon. You have got to want it for
yourseIf: Then
she adds, however, "I agree that everyone should have a chance
at t a h g the
same courses. . . . "
I ask her if she'd think it fair to pay more taxes so that this was
possible.
"I don? see how that benefits me: she says.
SavageInequalities.tifSavageInequalities1.tifSavageInequalities
2.tifSavageInequalities3.tifSavageInequalities4.tif
1
Strategic Marketing Planning of
Starbucks Coffee®
A Case Study
Angelito Estrada Christian Angeles
Presented by
2
Strategic Marketing Planning of

Starbucks Coffee
A Case Study
STARBUCKS HISTORY 03
The name was inspired by Herman
Melville’s classic novel Moby Dick’s
first mate.
This name and the mermaid logo were
inspired by the love of the sea, from
Starbucks original location in Seattle
Washington in the heart of Pike Place
Market.
Three friends, Jerry Baldwin, Zev Siegl,
and Gordon Bowker, who all had a
passion for fresh coffee.
1971 Starbucks opens first store in
Seattle’s Pike Place Market.
History 04
1982 Howard Schultz joins Starbucks as director of retail
operations and
marketing. Starbucks begins providing coffee to fine restaurants
and espresso
bars.

1983 Howard travels to Italy, where he’s impressed with the
popularity of
espresso bars in Milan. He sees the potential to develop a
similar coffeehouse
culture in Seattle.
1984 Howard convinces the founders of Starbucks to test the
coffeehouse
concept in downtown Seattle, where the first Starbucks® Caffè
Latte is served.
This successful experiment is the genesis for a company that
Schultz founds in
1985.
1985 Howard founds Il Giornale, offering brewed coffee and
espresso
beverages made from Starbucks® coffee beans.
1987 Il Giornale acquires Starbucks assets with the backing of
local investors and changes its name to Starbucks Corporation.
Opens in Chicago and Vancouver, Canada.
Total stores*: 17
05
1991 Becomes the first privately owned U.S. company to offer a
stock option program
that includes part-time employees.
Opens first licensed airport store at Seattle’s Sea-Tac
International Airport.
Total stores: 116
1992 Completes initial public offering (IPO), with common

stock being traded on the
NASDAQ National Market under the trading symbol SBUX.
Total stores: 165
1993 Opens roasting plant in Kent, Wash.
Announces first two-for-one stock split.
Total stores: 272
1996 Begins selling bottled Frappuccino® coffee drink through
North American Coffee
Partnership (Starbucks and Pepsi-Cola North America).
Opens stores in: Japan (first store outside of North America)
and Singapore.
Total stores: 1,015
History
06
1997 Establishes The Starbucks Foundation, benefiting local
literacy programs.
Opens stores in: the Philippines.
Total stores: 1,412
1998 Acquires Tazo, a tea company based in Portland, Ore.
Extends the Starbucks brand into grocery channels across the
U.S.
Launches Starbucks.com.
Opens stores in: Malaysia, New Zealand, Taiwan, Thailand and
U.K.

Total stores: 1,886
1999 Partners with Conservation International to promote
sustainable coffee-growing
practices.
Acquires Hear Music, a San Francisco–based music company.
Announces third two-for-one stock split.
Opens stores in: China, Kuwait, Lebanon and South Korea.
Total stores: 2,498
History
http://starbucks.com/
Starbucks Mission 07
"To inspire and nurture the
human spirit - One person, One
cup, and One Neighborhood at
a time."
Starbucks Vision 08
“Establish Starbucks as the
most recognized and respected

brand in the world."
Starbucks’ Six Principles 09
•Provide a great work environment and treat each others with
respect and dignity.
•Embrace diversity as an essential component in the way they
do
business.
•Apply the highest standards of excellence to the purchasing,
roasting and fresh delivery of their coffee.
•Develop enthusiastically satisfied customers all of the time.
•Contribute positively to their communities and their
environment.
•Recognize that profitability is essential to their future success.
Starbucks’ Unconventional Marketing Strategy 010
Perfect Cup of Coffee- Emphasis on product quality. Their
coffee, even though
priced slightly more expensive than expected, is notorious for
satisfying customers
with its rich, delicious taste and aroma.

Third Place- Creating this unique and relaxing “experience” and
“atmosphere” for
people to go to between home and work has been very important
for the company
as they realized that this is one of the strongest concepts
attached to the company,
to which customers have been strongly attracted.
Starbucks chose an unconventional marketing strategy that may
be
unique and seldom-tried, that will most perfectly match the
concept
that the company wants to portray.
Customer Satisfaction –From the entrance to the store to the
very
last drop of their coffees, it is a must that customers feel the
uniqueness of enjoying their Starbucks coffee experience.
Creating a Starbucks Community- The Starbucks marketing
strategy
has even expanded to create a community around their brand.
On
their website, individuals are encouraged to express their
experiences with Starbucks history, and the company strives to
“personally” join in the discussions.
Smart Partnerships-Starbucks Coffee Company has been known
to
create strategic partnerships that demonstrate the fact that

another
way to grow your business is to partner smart.
Innovation- Through the years, they’ve added different
flavors to their coffee, more food on their menu, and even
became one of the first to offer internet capability in their
stores.
Brand Marketing- The Starbucks marketing strategy has
always focused on “word-of-mouth” advertising and letting
the high quality of their products and services speak for
themselves.
Starbucks Expansion Strategy 013
•Establish hubs in large major cities
•Ensure city is able to support 20 or more locations in the
hub within the first two years
•Once hub is blanketed, open more stores in smaller city
areas around the region
•Implement zone managers to oversee the development
process of each hub
STARBUCKS MARKET ANALYSIS 014

SWOT analysis
SWOT Analysis
Internal factors
External factors
Strengths 016
g financial foundation

lives.
Brand Image 017
er
experience stresses the point about
consumer visits to its cafes being an experience
—one for each of the four stages of coffee
making: growing, roasting, brewing,
and aroma—each with its own color combinations, lighting
scheme, and component materials
that evokes the passion for coffee
received at least 24 hours training in the first
two to four weeks. The training included classes on coffee
history, drink preparation, coffee
knowledge (four hours), customer service (four hours), and
retail skills, plus a four-hour workshop
called "Brewing the Perfect Cup.“
s of main concern

exactly that—not .995 pounds or 1.1 pounds;
never let coffee sit in the pot more than 20 minutes; always
compensate dissatisfied customers with a
Starbucks coupon that entitles them to a free drink.
Weaknesses 018
ded too quickly, and have already saturated
the US
market
of their
customers
Opportunities 019

European and Latin American markets
- Expand on distribution
- widen market
-
cafes in
the United States
Threats 020

rmers might switch from coffee to vegetable crops
Threats 021
when it
upgraded its coffee in 2006
Starbucks
store declined from an estimated 460 in 2005 to just above 400
in
2007
the
two chains intensified further.
Bean

Threats 022
ability of buyers
to force down prices
the lack of
differentiation in the basic coffee industry
-Starbucks Groups:
nions
Unique Strategy
02
3
To capture key locations and open stores in close proximity to
each other is

unique strategy for Starbucks
ievements
are closed
down
achieve market
dominance. With over 20 million regular customers per week
-
Starbucks strategy
relies on word of mouth advertising.
-Pepsi-Cola Co.
- New products: Hot sandwiches, new drinks, coffee liqueurs,
instant
coffee
Industry PEST Analysis
02
4
Political Influences
State & Local government controls
Economic Influences

Changes in disposable income could influence purchase
levels
Social Influences
Consumer preferences could shift from coffee to other
beverages
Technological Influences
Use of technology can improve operational efficiencies
Competitors 025
-Eleven
Kraft
Boston Matrix 026

Boston Matrix 027
Above is the Boston Matrix. It shows the cash cows as the
regular Starbucks line of
Coffee’s, Latte’s and Frappuccino’s found at nearly every
location. These are stable
products that account for the bulk of sales. A potential star is
the International locations,
which hold less financial risk and open doors for innovation and
stability. Question
marks are the recently added VIA instant coffee to be expanding
to grocery stores and
convenient stores. Current products like this such as the dog,
pre-bottle Frappuccino’s
account for a tiny fraction of sales. Another question mark is
the oft forgotten sub-brand
Seattle’s Best. The company will be revamping this brand and
its future is unknown.
The following is Porter’s Generic Competitive strategy. Shown
is Starbucks as a whole in
the differentiation strategy as they provide a high quality coffee
and unique experience
in the convenience of a large volume of locations, which
separates them from their
competition. VIA, the new instant coffee line is straddling
differentiation and low cost-
leadership. While it will be a low cost and convenient
alternative to Starbucks regular
coffee, it is still unique from other products in the market. The
in-store gifts and brewing
utensils are in the focused differentiation category as they cater
to the coffee lover, and
are unique items found only in the Starbucks stores.

Competitive Advantage 028
The above is Porter’s Generic Competitive strategy. Shown is
Starbucks as a whole in
the differentiation strategy as they provide a high quality coffee
and unique experience
in the convenience of a large volume of locations, which
separates them from their
competition. VIA, the new instant coffee line is straddling
differentiation and low cost-
leadership. While it will be a low cost and convenient
alternative to Starbucks regular
coffee, it is still unique from other products in the market. The
in-store gifts and
brewing utensils are in the focused differentiation category as
they cater to the coffee
lover, and are unique items found only in the Starbucks stores.
Porter’s 5 Forces
02
9
Porter’s 5 Forces 030
Above are Porters 5 Forces and their level of threat to
Starbucks. The bargaining power

of suppliers is high because of the natural resources needed to
create their ingredients
and Starbucks believes in finding fair-trade and high quality
beans, often from other
countries These specifications limit the number of suppliers.
The threat of new entrants
is medium in that the coffee market is changing. The need for
ambiance and a place to
share is losing edge to the on-the-go alternatives, and should a
new entrant comes
along with a different business model there is room for threat.
However, Starbucks is the
household name. Industry competitors is on the rise because of
McDonalds creating the
McCafe line. Peets have increased presence as well. Threat of
substitutes is low, because
coffee is always going to be a desired drink and pastime of
choice.
Alternative Action 031
There are alternative actions Starbucks can take to secure its
competitive
advantage it has upheld for so long. Below is the current value
curve for
Starbucks and its most relevant competitors Peets, and the
McCafe Line.

MC Donalds shows a similar curve, but lower in all levels. The
one item that
truly separates the two is the reputation Starbucks has in the
coffee
industry unlike McDonalds. The rest is similar, which shows a
threat to
Starbucks becoming part of a red ocean. Peets have an
opposing curve,
which could be a threat but their lack of volume, and brand
recognition
limits them from competition. My suggestions for the Four
Action
framework would be to create more customization by al- lowing
users
create new flavors and drinks above and beyond the options
they have
now. This would incorporate with the other creation of online
user
experience. Users could go on to the online Starbucks interface
and have
complete control to create their own drink, order online, find
the nearest
Starbucks and receive directions. Users could post their favorite
drink
combination and others could vote on it. Also involved in user
experience
could be mobile apps, putting in drink orders, finder etc. to
enhance the
Starbucks brand in the new digital era and to create a blue
ocean for the
coffee experience.
DEMOGRAPHICS 034

Perceptual Mapping for McCafé, Starbucks and Dunkin’ Donuts
03
5
Starbucks Today
36
• $15 billion chain coffee business
•Total net revenues increased 10% to 2.8 billion
•EPS increased 21% to $0.34 in Q2 FY11 compared to $0.28 in
Q210‘
s 16,706 Starbucks stores in the world located in more than 50
countries
Number of Starbucks’ stores world wide
Starbucks around the Globe
STARBUCKS EXPERIENCE - 4 P’s

Product – What Starbucks can provide for me?
03
8
Tangible Product
Coffee, coffee bean, tea, food, cold
drinks (milk, water, juice), tea, bottle ,
mug , music and seasonal products
Core Product: services provided in store
Coffee, considerable service, relieved
atmosphere, decoration , Wi-Fi
connection
Augmented Product: intangible service
Interaction with customers
Tangible Product
Tangible Product
Coffee, coffee bean, tea, food,
cold drinks (milk, water, juice), tea,
bottle , mug , music and seasonal
products

Core product
Core Product:
services provided in
store
Coffee, considerable
service, relieved
atmosphere,
decoration , Wi-Fi
connection
Augmented Product
Augmented Product:
intangible service
Interaction with
customers
Placement

and bakeries
-value pricing strategy
Price Price
44
PROMOTION: COMMITMENT TO THE WORLD
“We always figured that putting people before
products just made good common sense.”

Sales
s
discounts)
Merchandising
Social Media

Corporate Social Responsibility(CSR)
greener stores
energy
quest for the 100%
recyclable cup
Starbucks in the Philippines
December 4, 1997, the Philippines had its first taste of the
Starbucks Experience with its very
first branch at the 6750 Ayala Building in Makati City.
Starbucks has since won the hearts of
the Filipinos.
The opening of the 6750 Ayala store marked an important
milestone in our history – the
Philippines became the third market to open outside North
America.
The tradition of warm hospitality, constant need for connection,
and love for coffee – these
are the qualities that make Starbucks Coffee and the Filipino
people a great culture fit.

Future Action
51
CONCLUSION
Starbucks success is achieved through a few factors.
ent service provided at the stores
These factors not only have increased the sales but also the
reputation among
the coffee lovers. Starbucks encounters aggressive competition
in all areas of
its business activity. The market for each of their business
segments are
characterized by vigorous competition among major
corporations with long
established positions and a large number of new and rapidly
growing firms.
Anyway, as Starbucks have a good financial capacity with good
strategies; it
can overcome all the competitors to shine high as the first class
coffee
purveyor

Questions / Comments
53
Angelito Estrada

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