Starbuck’s Analysis Shelby Mills, Brandon Thompson, Paul Phillips, Jill Berger, Jason Knight

About Starbucks Howard Schultz founder and president First Starbucks opened in 1972 in Seattle The name, inspired by Moby Dick, evoked the romance of the high seas and the seafaring tradition of the early coffee traders. He had a vision to bring the Italian coffeehouse tradition back to the United States

Continued..  Today, with more than 18,000 stores in 62 countries, Starbucks is the premier roaster and retailer of specialty coffee in the world.  “To inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.”

Financial Statement 2009  For the first time, they were beginning to see traffic in their U.S. stores slow  Strong competitors were entering their business  They were also proud to be able to contribute a match under their 401(k) program

Financial Statement 2010  revenues increased to a record $10.7 billion  Their full-year operating margin of 13.3 percent  Operating income increased by $857 million from fiscal 2009 to 1.4 billion

Financial Statement 2011  global business delivered the highest levels of service to their customers  stock price had increased 43 percent from a year earlier  they returned approximately $945 million to shareholders

Financial Statement 2012  Starbucks consolidated global revenues reached a record $13.3 billion, a 14 percent increase, with revenue growth driven by a 7 percent  Their operating income was $2 billion  16 percent increase

Financial Statement 2013  Starbucks consolidated revenues reached a record $14.9 billion, and had a 12 percent increase over last year driven by a 7 percent rise in global comparable  opening of 1,701 net new stores around the globe  Global performance, in 2013, Starbucks had more than 3 billion customer visits to our more than 19,000 stores in 62 countries  Sales growth in all 12 markets  Looking ahead, our plans to open 1,500 net new stores

STRENGTHS: Global coffee shop, more than 62 countries One of the Fortune Top 100 Companies to work for Values its work force Strong ethical values and shown in mission statement High quality products WEAKNESSES: High turnover rate in part time employees Possible that their innovation may falter over time Prices may be too high for some consumers OPPORTUNITIES: Made a CD burning service in 2004, another way to make revenue Food Moving to other countries India could be a possible opportunity, but prices should vary Co-branding THREATS: Prices If the coffee market will even stay in favor with consumers Exposed to the high rise of dairy costs Many other coffee shops have taken the ideas of Starbucks

Identify chief business/economic characteristics of industry environment  Expanding product lines  Dark, Medium, and Blonde roast  “Trenta” size  Seasonal beverages  La Boulange breakfast products  Clothing line

Chief business/economic characteristic continued  Low barriers to entry  Labor intensive  Face to face interaction  High level of competition  Expansion and growth  International and domestic

Identify/assess driving forces for change  Threat of potential entrants into market  Low barriers to entry  Threat of substitutes  Libraries/bookstores  Soda/tea/juice  Rivalry amongst competitors  Bargaining power

Evaluate strength of competitive forces  McDonalds  Dunkin Donuts  Burger King  Einstein Bagels  Locally owned shops

Strongest Competitors  Companies in best position to compete  McDonalds  Fast Food Industry  Lower Prices

Weaker Competitors  Einstein Bagels  J&B Coffee Company  Local (Mom and Pop) Coffee shops

Who will make competitive moves Starbucks  Started serving more food items  Added Drive thrus  Merchandise Sales McDonalds  Remodeled locations  McCafe Prediction: McDonalds or Fast food industry Extreme amount of resources and more room to grow

Keys to Competitive success  Innovation  Expansion  Employee Satisfaction  Customer Service  Value Creation  Differentiation

How attractive is the Industry?  Relatively Attractive  Low barrier of entry  Difficult to succeed on National and Global scale  Local shops able to maintain above average profitability

Formulating a Strategy  Separate from competitors  Differentiation

Marketing Techniques  Little media advertising  Word-of-mouth  Let the products speak for themselves

Customers Relationships  Don’t just make a sale  Create a community type of environment  Build personal relationships  18 visits per month, 10 percent will visit twice a day

Fast Service  Quick and easy ordering  3 to 5 minute wait time  Brooklyn location  220 customers served per hour  Coffee quality  Quality product + timely fashion= Value

Employees  Specialized training  30 hour program  Health policy  Stock options  60 percent employee turnover rate  Saves time and money

Partnership Strategies  Strategic Alliances  NAACP  Barnes and Noble  United Airlines

Focus on Quality  “Perfect cup of coffee”  More satisfying, better tasting  Premium Price  Variety of products

Corporate Social Responsibility  Co-exist with the community  Youth Action Program  Supports younger generations  Betters communities  Teaches coffee farmers safe/efficient production techniques  Clean water for children  C.O.A.S.T.

Starbuck’s Maintaining Blue Ocean Strategy

Loyal Customers  “We make sure everything we do honors that connection – from our commitment to the highest quality coffee in the world, to the way we engage with our customers and communities to do business responsibly”.  Low involvement, high experience decision making

International Market  Expansion  Culture Difference  Maintain starbucks image and reputation

Adding Value in Stores  Meeting room spaces  Quiet, private, and intimate group meeting place

Varying Menu Options  Offer substantial food  Starbucks is industry leader and can set the industry standard

Starbucks partnerships  Little money on advertising  Relies on word of mouth  Strong reputation  Ultimate marketing plan for brand awareness