Crystal Hill Stephen Lechtenberg Anand McGee Allison Purtell Jason Torres

 Highest imported product in world, second to oil  U.S. Coffee Industry  20,000 stores, $11 Billion profit  Top 50 companies, 70% of profit  Secure prime locations, drive store traffic, deliver high quality products

 Business Characteristics  Expansion, franchising and licensing, store traffic  Economic Characteristics  Coffee beans, futures contracts

 Environmental concerns  Sustainable coffee  Organic coffee, fair trade, and shade grown coffee  Customer’s desire for information  “Green” coffee

 Threat of New Entrants  Low startup costs, strong first mover advantage  Rivalry Among Existing Firms  Highly concentrated, highly competitive  Threat of Substitute Products  Low customer switching costs, differentiation  Bargaining Power of Customers  Millions of coffee consumers worldwide, little power  Bargaining Power of Suppliers  Firms hold power, suppliers compete against eachother

 Starbucks  First mover advantage (Blue Ocean)  Differentiation  McDonalds  McCafe division  Dunkin Donuts  Starbucks biggest competitor  Nestle

 Innovation  Contribute more capital to R&D  Expansion  Starbucks, 700 new stores in 2009  McDonalds, 1,000 new stores in 2009  Dunkin Donuts, 100 stores in Taiwan by 2017  Product Differentiation

 Starbucks:  Continue disciplined expansion  Product differentiation  McDonald’s:  Most products for your dollar  Nestle:  Unmatched product and brand portfolio  Dunkin’ Donuts:  Innovation

 Coffee beans are 2 nd largest export  Large companies make up 70% of industry  Must secure prime locations, manage and increase store traffic, and sell high quality products  Companies must expand in order to succeed  Competition on price  Relationships with coffee producers is key  Overall attractive industry  Starbucks saw $1,000,000 profit per store in 2008  Typical coffee shop saw $500,000 profit per store

 Recognition in Hollywood  Loyal customers  Rewards programs  My Starbucks Rewards card  Facebook  Competition

 Consolidated Company revenue  $2.5 Billion in 2008  $2.4 Billion in 2009  Due to strengthening U.S. dollar  And fewer stores being opened in ’09  High costs in closing 800 stores  Current stock price of $21.59  Forecasted to increase in December

 First price reduction in August 2009  Due to 6% decrease in sales  On standard drinks by 5-15 cents  To attract non-loyal customers  Specialty drinks increased  Was last raised in 2007 by 5 cents  Loyal customers won’t leave  Trying to cut down costs by being more efficient in stores

 Operational Techniques  Extending their market to other business channels  Joint ventures  Marketing and sales strategies  Focus on quality and experience vs. price

 Customer service  “Develop enthusiastically satisfied customers all of the time.”  Wireless internet  Comment cards  Management techniques  Empowerment of employees  Every employee a “partner”

 Vertically Integrated  Placement  “…to become the most recognized and respected brand in the world”

 Lack of current new product development  Slow to diversify into new markets  Pricing strategies  Current marketing strategies not meeting marketing objectives  Younger, less educated customers with lower economic status

 Market saturation has gotten in the way of products and services not meeting marketing characteristics  Low customer satisfaction  Speed of service  Inconsistency

 Co-branding  International expansion  India and Pacific  “Going green” practices

 Rising costs of coffee or dairy products  Copycat brands/Competition  McDonalds and Dunkin Donuts  Declining coffee market  New beverage or pastime could evolve

Eliminate Underperforming stores Raise Education of coffee with employees Reduce Amount of time employees spend making individual drinks Calories in specialty drinks Create More loyalty rewards A better “everyday brew”

 By keeping Focus on quality coffee and excellent customer service  Easier to acquire quality suppliers  Harder for competition to keep up

 Quality coffee  Diversified menu, reaching across 3 tiers of customers  Technology  Employees

Problem : Overexpansion Solutions : Transformation Agenda 1) Improving U.S. state 2) Re-igniting emotional attachment 3) Build for the long term 4) Expand around globe outside U.S.