1. Contents
Introduction…………………………………………………………………………….. 1
Starbucks’s Logo………………………………………………………………………. 2
Starbucks Profile………………………………………………………………………. 4
Starbucks Structure…..................................................................................................... 6
Marketing Activities…….……………………………………………………………... 9
Operations……………………………………………………………………………… 11
The use of IT in Starbucks…………………………….……………..………………… 13
Financial Report….......................................................................................................... 13
Porter’s Forces Analysis……………………………………………………………….. 21
SWOT Analysis………………………………………………………………………... 26
Recommendations……………………………………………………………………… 32
Conclusion……………………………………………………………………………… 33
References……………………………………………………………………………… 34
Appendixes…………………………………………………………………………….. 37
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2. • Introduction:
In 1971 Starbucks began when three friends-English teacher Jerry Baldwin, history
teacher Zev Siegel, and writer Gordon Bowker opened a store called Starbucks Coffee, Tea, and
Spice in the touristy Pikes Place Market in Seattle (Thompson) with the future aim of providing
coffee to a number of restaurants and surrounding bars and hopes of creating a “third place”
between home and work. Customers are able to socialize, read, study or enjoy music while
drinking coffee. Starbucks strategically positions each store with hopes of matching the specific
location, helping to create a unique atmosphere. The current international situation for Starbucks
seems to be an emerging part of their business and the reorganization of this is proved by their
aim to become a leading global company through making a difference in people’s lives all
around the world. This goal is quite close to being achieved as proved the Starbucks current
locations in international markets and the successfulness of these ventures.
The current countries in which Starbucks are located in are:
Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, New
Zealand, Oman, Peoples Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, South
Korea, Switzerland, Taiwan, Thailand, Untied Arab Emirates, United Kingdom, and the United
States.
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3. Starbucks' strategy for expanding its retail business is to increase its market share in existing
markets and to open stores in new markets where the opportunity exists to become the leading
specialty coffee retailer. In support of this strategy, the Company opened 647 new stores during
the fiscal year ended September 30, 2001 (fiscal 2001). At fiscal year end, Starbucks had 2,971
Company-operated stores in 38 states, the District of Columbia and five Canadian provinces
(which comprise the Company-operated North American retail operations), as well as 252 stores
in the United Kingdom, 25 stores in Thailand and 18 stores in Australia (which comprise the
Company-operated international retail operations).
• Starbucks’ Logo:
The company was in part named after Starbuck, the coffee-loving first mate character in the
book Moby-Dick, as well as a turn-of-the-century mining camp on Mount Rainier, Starbocks. Its
logo is a "twin-tailed mermaid, or siren as she's known in Greek mythology”. According to
Howard Schultz's book Pour Your Heart Into It: How Starbucks Built a Company One Cup a
Time, the name of the company was derived from Moby-Dick, although not in as direct a fashion
as many assume. Gordon Bowker liked the name "Pequod" (the ship in the novel), but his
creative partner Terry Heckler objected: "No one's going to drink a cup of Pee-quod!" Heckler
suggested "Starbo," the name of a mining camp on Mount Rainier. Combining the Moby-Dick
idea with "Starbo" resulted in the company being named for the Pequod's first mate,
Starbuck.The company logo is a two-tailed siren. The logo has been streamlined over the years.
In the first version, the Starbucks siren had bare breasts and a fully-visible double fish tail. In the
second version, her breasts were covered by hair, but her navel was still visible, and the fish tail
3

4. was cropped slightly. In the current version, her navel and breasts are not visible at all, and only
vestiges remain of the fish tails.
Starbucks was founded in Seattle, Washington, in 1971 as a local coffee bean roaster and
retailer called Starbucks Coffee, Tea and Spices. Howard Schultz joined the company in 1982
and was inspired on a trip to Italy to develop a similar espresso bar and coffeehouse culture in
the United States. To advance the concept, he founded the company Il Giornale three years later.
In 1987, Schultz purchased Starbucks, merged it with Il Giornale, and renamed the company
Starbucks Corporation. The logo on the left is that of the Il Giornale company. As you can see,
the Il Giornale logo is somewhat similar to Starbucks logo i.e being circular and having a band.
The original logo, as seen on the left, the Starbucks siren was topless and had a fully-visible
double fish tail. The original logo has raised some controvery because of the bare chest, but the
logo continues to appear on some of the products like the Starbucks Anniversary Blend lb coffee
bags. Both the original logos seem to be perfect on wooden crates.
4

5. .
In the second version, her chest was covered by her flowing hair, but her navel was still
Visible, and the fish tail was cropped slightly. The logo also inherited the stars from the Il
Giornale logo. In the current version, her navel and chest are not visible at all, and only vestiges
remain of the fish tails.
• Starbucks profile:
Starbucks Corporation engages in the purchase, roasting, and sale of whole bean coffees
worldwide. It offers brewed coffees, Italian-style espresso beverages, cold blended beverages,
various complementary food items, and a selection of premium teas, as well as beverage-related
accessories and equipment, through its retail stores. The company also licenses its trademark
through other channels, such as licensed retail stores, as well as through certain of its licensees
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6. and equity investees. In addition, Starbucks Corporation produces and sells ready-to-drink
beverages, which include bottled beverages, espresso drinks, chilled cup coffees, and ice creams.
Its brand portfolio primarily includes Starbucks, Settles Best Coffee, Tazo, Frappuccino,
Starbucks DoubleShot, Starbucks Discoveries, Starbucks super-premium Tazo Tea, and
Starbucks super-premium. Starbucks Corporation was founded in 1985 and is based in Seattle,
Washington.
Starbucks is the largest coffeehouse company in the world. There are more than 13,100
Starbucks stores in the world, spanning 40 countries. The stores all sell drip coffee, espresso
drinks, tea, blended drinks, coffee mugs and other accessories. Interestingly enough, the prices
found at Starbucks Coffee are significantly higher than the market average. The higher prices are
a direct result of their ingenious marketing strategy. Starbucks has been a target of protests on
issues such as fair-trade policies, labor relations, environmental impact, political views, and anti-
competitive practices. Starbucks can be found in many popular grocery chains in the us and
Canada as well as In many air ports big shopping mall metro station and street in all of the world.
The member of the company’s board of directors are Howard Schultz(chair),Jim Donald,
Barbara bass, howard behar ,bill Bradley, melody hobson ,olden lee , james shennan ,Javier
terul ,Myron ullman and craig weatherup
• Starbucks Structure:
6

7. A company’s structure refers to the way it is organized. Starbucks has a functional structure
(human resources, marketing, corporate social responsibility, public affairs).The organization of
Starbucks is very loosely structured. It emphasizes the company's constant need for new ideas
and employee input. Starbucks refers to its employees as partners, and extends to all of them
(even part time help working at least twenty hours a week), benefits such as health coverage and
stock options. Starbucks believes creating the value of brand equity occurs through investing in
its employees who are the face of the brand rather than in traditional tools like advertising;
Before a company can expect trust from its customers, it must have the trust of its employees.
Starbuck has no formal organization chart and does not work with hierarchy structure. It consists
of two main departments, functional department consists of marketing, supply chain, operations,
finance and human resources, and cross functional teams, consisting of local store marketing and
marketing campaigns. The decision making process in Starbucks is bottom – up process, where
the employees are empowered even to take decisions without referring back to the management.
Different parts of Starbucks' structure are:
Retail Stores: This is the most visible expression of the Starbucks Spirit. The career
development climate at Starbucks encourages motivated, customer-focused partners to make the
most of their talents. In Starbucks, they try to match individual skills with company needs while
providing a continual learning environment.
Starbucks Support Center: Starbucks is much more than the corner store. In Starbucks, there
are a diverse group of forward-thinking professionals who bring an uncompromising
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8. commitment to excellence at all levels. Supporting and enhancing Starbucks partners globally
takes a team of dedicated, results-oriented individuals. Their partners in Seattle provide this
support while meeting the unique challenges of rapid growth. The environment is dynamic and
ever-changing. The opportunities are rewarding for partners with experience in various areas,
some of which are summarized below:
 Accounting
Consists of partners who possess strong business acumen and an understanding to the "big
picture." We look for detail-driven specialists with financial/accounting systems knowledge to
provide support in the following areas:
• Cost Accounting
• Retail Accounting
• General Accounting
• Financial Reporting
• Cash Management
• Tax
 Administration
Oversees several large functions in support of business units and departments at the
Starbucks Support Center. Their employees are committed to create an efficient and
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9. inspiring work environment by providing strategic direction, policy development and
communications in the following areas:
• Facilities
• Risk Management
• Travel Management
• Security
• Customer Relations
 Coffee
This is where it all starts. We're a rare organization in that our inspiration really does
grow on trees. But the key is which trees. Finding the best of the best takes expert care in
the selection, purchasing and tasting of the finest green coffee beans. This takes a team
of:
Green Coffee Buyers - monitor the coffee futures market and manage coffee contracts,
buying only the top percentage of the world's green coffee.
Green Coffee Specialists - develop the ideal roasting recipe, develop quality standards,
test and approve samples for our unique varietals and blends.
Coffee Communication Specialists - committed to the training, education and
promotion of our coffee to internal and external customers.
Other departments are: Communications & Public Affairs, Direct Response (Mail Order),
Finance & Planning, Grocery, Human Resources, International, Law and Corporate
Affairs, Management Information Systems, Marketing, Merchandising, Research &
9

10. Development, Retail Operations, Store Development, Specialty Sales and Marketing,
Strategic Alliances, and Supply Chain Operations.
• Marketing Activities
Marketing is usually defined as the organization wide generation, dissemination, and
responsiveness to market intelligence. This definition at once changes the dominant paradigm
that has defined marketing for decades. Starbucks is the leading specialty coffee retailer in the
nation, with over 5,000 locations in 22 international markets. Starbucks positions their products
on a relatively simple plane. They focus on quality and experience, rather than price.
A comparison of specialty drinks with its competitors reveals very minor differences. Starbucks'
image is one of the key elements to their success. The company has realized that people don't
only come for the coffee; they come for the atmosphere. People socialize, read, study, or just
enjoy the music while drinking their coffee. Knowing this, Coffee shops try to make their stores
unique in some way or another that will create an appealing atmosphere. Starbucks has less of a
distinct setting for their locations; instead, they focus on having plenty of comfortable seating so
that people feel welcome to stay longer than they might have planned. Starbucks also positions
each store individually according to the specific location it is in.
This flexibility has attributed to the great success of the Company in the past decade. Another
important part of Starbucks' positioning is that they are environmentally friendly. While other
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11. retailers position themselves in similar ways, no one focuses to the extent that Starbucks has.
Consumers seem to respond to environmentally friendly companies who seem to truly care about
the future of the world. Advertising marketing which used by Starbucks has also been a key
success factor. Starbucks has found more success advertising on a local level rather than to the
nation as a whole. The Company advertises a lot through print mediums, as Starbucks' target
market tends to be educated people who do more reading than the average person.
“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. For years, this has been uniquely Starbucks, and it has played a huge part in making
Starbucks Coffee Company a success. The definition of viral marketing speaks to this new word
of mouth that Starbucks has run with, and made their own. Starbucks has appealed to such a
wide target market; it seems every product introduced will be an instant success (coffee, sodas,
teas, ice creams and pastries). Ranked in Fortune magazine as the one most innovative
company, it’s no surprise that the new technological addition, the Starbucks Card, boosted sales
and helped growth during a time when the economy was struggling. “Starbucks went back to
basics, and they’ve approached the basics with a science and intensity that no one has ever done
before.
As a result, A significant portion of Starbucks marketing efforts are locally driven and
focus on connecting with the community through sponsorships, events and community giving
programs. In some instances, Starbucks could be involved with an event that may be relevant to
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12. one community, but not to another. In all cases, they strive to support their communities in a way
that is consistent with Starbucks culture and values.
• Operations
Starbucks was visional to be established as the most recognized and respected brand in the world.
They started by building the organization core values, they use the finest coffee beans and they
wanted the consumers to have a shining image. Starbucks has maintained six principles to deliver
their mission; they started providing a great work environment and holding the diversity as an
essential business. Purchasing and roasting were applied in the highest standards, and they make
sure their customers are satisfied.
The overall company operations are based on purchasing and roasting high quality whole been
coffees and selling them along with different styles and coffee related accessories. They depend
mainly on their employees to manage operation that's why they focus on training their employees
as the main asset in the company. Starbucks operations strive to develop the Starbucks brand
outside the Company-operated retail store environment though a number of channels. By
establishing relationships with well-known third parties which share their values and
commitment to quality. Sometimes they get into joint ventures with existing companies,
including grocery channel licensing agreements, warehouse club accounts, international retail
store licensing agreements, direct-to-consumer market channels, joint ventures and more.
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13. Starbucks has a long-term licensing agreement with Kraft Foods, Inc. to market and distribute
Starbucks whole bean and ground coffees in the grocery channel in the United States. Kraft
manages all distribution, marketing, advertising and promotions for this particular product. The
Company has two non-retail domestic 50-50 joint ventures. This includes one with PepsiCo, Inc.
who develops and distributes ready-to-drink coffee-based products. Also, they have a joint
venture with Dreyer's Grand
Ice Cream, Inc. to develop and distribute Starbucks premium coffee ice creams. Starbucks also
makes their coffee and coffee-related products available via mail order and online. For the most
part, Starbucks is vertically integrated, controlling its coffee sourcing, roasting, and distribution
through its retail stores. Starbucks deals with international small suppliers to supply coffee with
fixed prices rather than using the Fair Trade Coffee. They mainly use-non-smoking restrictions
in their stores, but in some countries with conflict in the culture thy had to have smoking rooms.
Experience of their employees is very important due to the focus on the employee sanctification.
• The use of IT in Starbucks
13

14. Total Quality Management was built into their processes; they use the system control over
individual sites by headquarters. They have established their own information system to utilize a
large amount of inform action. All the controls are determined by the manger of the store, and it's
based on information provided by the system
• Financial Report
The Starbucks Company’s objective is to establish Starbucks as the most recognized and
respected brand in the world. In realizing and achieving this goal, the Company plans to continue
to rapidly expand its retail operations, grow its specialty sales and other operations, and
selectively pursue opportunities to leverage the Starbucks brand through the introduction of new
products and the development of new distribution channels. Starbucks used the design of a
matrix configuration by combining divisional and functional structures. (Starbucks)
Starbucks has three reportable operating segments, and each segment provided the indicated
percentage of total net revenues for fiscal year ended September 27, 2009 (“fiscal 2009”): United
14

15. States (“US”) (73%), International (19%) and Global Consumer Products Group (“CPG”) (8%).
In the fourth fiscal quarter of 2009, the Company changed the composition of its reportable
segments. The US foodservice business, which was previously reported in the US segment, is
now reported in the CPG segment, as a result of internal management realignments within the
US and CPG businesses. Segment information for all prior periods presented has been revised to
reflect this change.
The US and International segments both include Company-operated retail stores and certain
components of specialty operations. Specialty operations within the US include licensed retail
stores and other initiatives related to the Company’s core business. International specialty
operations primarily consist of retail store licensing operations in nearly 40 countries and
foodservice accounts in Canada and the United Kingdom (“UK”). The International segment’s
largest markets, based on number of Company-operated and licensed retail stores, are Canada,
Japan and the UK. The CPG segment includes packaged coffee and tea, and other branded
products sold worldwide through channels such as grocery stores, warehouse clubs and
convenience stores, and US foodservice accounts. CPG operates a significant portion of its
business through licensing arrangements and joint ventures with large consumer products
business partners. This operating model leverages the business partners’ existing infrastructures
and as a result, the CPG segment reflects relatively lower revenues, a modest cost structure, and
a resulting higher operating margin, compared to the Company’s other two reporting segments,
which consist primarily of retail stores.
• Marketing Policy
15

16. Starbucks customers are people of diverse ethnic, income and age groups with varying tastes and
interests. Starbucks is marketing on the youth and long been supporting community activities
and events important to customers. Generally, the Company’s marketing, advertising, and event
sponsorship are not directed at children or to the youth. (Starbucks)
Market Environment
Year 2002
• The Company signed in a memorandum of understanding with Fairtrade Labeling
Organizations International (FLO) enabling Starbucks to enter into licensing agreements with
national Fair Trade organizations to sell Fair Trade Certified coffee in the countries where
Starbucks does business.
• Published its first Corporate Social Responsibility Annual Report
• Signed licensing agreement with TransFair Canada to bring Fair Trade Certified coffee to more
than 270 retail locations in Canada.
• Starbucks Board of Directors authorized stock repurchase plan of up to 10 million shares.
• Starbucks Coffee International opened in Oman; Indonesia; Germany; Spain; Puerto Rico;
Mexico; Greece and Southern China Macau and Shenzhen accounting to a total Starbucks
location of 5, 886.
Year 2003
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17. • Begun a three-year $225,000 commitment to America SCORES, a national non-profit, youth
development organization that uses soccer and literacy to inspire teamwork among at-risk
children in urban public schools.
• Starbucks Board of Directors authorized stock repurchase plan of up to 10 million shares.
• Starbucks Coffee International opened in Turkey, Chile, Peru, and Cyprus.
• Current location total = 7, 225
Year 2004
• Starbucks Coffee International opened in Paris.
• Joined the United Nations Global Compact, an international network of corporations, U.N.
agencies, trade unions and non-governmental organizations that support a shared set of nine
principles about the environment, labour and human rights.
• Signed licensing agreement to open Seattle’s Best Coffee cafes in more than 400 existing
Borders Books & Music stores over the next several years in the continental U.S. and Alaska,
and within new Borders stores as they open.
• Current location total = 8, 569
Year 2005
• Announced that the Board of Directors authorizes the repurchase of up to 5 million shares of
the Company’s common stock.
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18. • Starbucks Board of Directors approves a two-for-one stock split. This is the fifth two-for-one
split of the Company’s common stock since its initial public offering in 1992.
• Purchased 10 million pounds of Fair Trade Certified coffee and became North America’s
largest purchaser of Fair Trade Certified coffee.
• Starbucks location total = 10, 241
Year 2006
• Current Starbucks location total = 10, 801 . (Starbucks)
In fiscal 2007, Starbucks says it will launch three initiatives designed to improve the energy and
environmental performance in its stores. These include:
• Working with the U.S. Green building Council to develop LEED standards for the retail sector
to set out best practices for environmentally sound design of new stores, and provide a basis for
third-party certification to ensure the standards are met in 2007 Starbucks says it will complete
its participation in the pilot of these standards.
• Using a representative sample of stores as a “test bed” to monitor energy and water usage to
determine conservation opportunities.
• Providing approximately 350 store managers in six regions with “resource report cards” that
give feedback on store energy and water use, as well as trend data and comparisons to
benchmark operations the goal of this program is to help partners identify ways to use water and
energy more efficiently and reduce costs. (http://www.environmentalleader.com/2007/0)(refer to
Starbucks Annual report 2009)
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19. • REVENUE COMPONENTS
The following table shows the Company’s revenue components for the fiscal year ended
September 27, 2009:
In July 2010, Starbucks corporation reported financial results for its fiscal third quarter ended
June 27.2010.
“Starbucks third quarter results reflect a continuation of the strong performance and momentum
we have been driving across our businesses around the world,” said Howard Schultz, chairman,
president the same time as we posted the highest levels of customer satisfaction in Starbucks
history and despite the challenging global economic environment. Strong performance is
enabling us to deliver record results and increase the dividend to shareholders while continuing
to innovate and invest in our businesses.”
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20. “Supported by the most significant marketing investment in the company's history, in Q3 we
successfully launched Starbucks VIA® into the grocery channel in the U.S., announced
upcoming launches in the grocery channel in Japan and the U.K., brought innovation to the
blended beverage category and reenergized our $2 billion Frappuccino® beverage platform by
creating real consumer and retailer excitement in this important growth category. Our Q3
investments provide us with a very solid foundation for growth in fiscal 2011 and beyond,"
added Schultz.
Third Quarter Fiscal 2010 Summary
See
the
Reconciliation of Selected GAAP Measures to Non-GAAP Measures at the end of this document
for further detail.
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21. • Forward-Looking Statements
This release contains forward-looking statements relating to certain company initiatives and
plans, as well as trends in or expectations regarding, earnings per share, revenues, operating
margins, comparable store sales, store openings and closings, restructuring charges, cash flow
from operations, capital expenditures, free cash flow, and commodity costs. These forward-
looking statements are based on currently available operating, financial and competitive
information and are subject to a number of significant risks and uncertainties. Actual future
results may differ materially depending on a variety of factors including, but not limited to,
coffee, dairy and other raw material prices and availability, successful execution of the
company’s initiatives, fluctuations in U.S. and international economies and currencies, the
impact of competition, the effect of legal proceedings, and other risks detailed in the company
filings with the Securities and Exchange Commission, including the “Risk Factors” section of
Starbucks Annual Report. (http://news.starbucks.com)
• Main Aspects of Porter’s Five Forces Analysis:
The original competitive forces model, as proposed by Porter, identified five forces which
would impact on an organization’s behavior in a competitive market. These include the
following:
1. The rivalry between existing sellers in the market.
2. The power exerted by the customers in the market.
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22. 3. The impact of the suppliers on the sellers.
4. The potential threat of new sellers entering the market.
5. The threat of substitute products becoming available in the market.
The rivalry between existing sellers in the market:
Porter's first force that Porter describes is current rivalry among existing firms. In the specialty
eateries industry, Starbucks' current and direct U.S competitors are Diedrich Coffee, Seattle's
Best Coffee, and Einstein/Noah Bagel Corporation. The competition, however, is not equally
balanced. Diedrich Coffee operates 370 coffeehouses in 37 states and 11 countries. Seattle's Best
Coffee operates 160 coffee cafes and 20 Italian coffee cafes in 17 states and 8 countries.
Einstein/Noah Bagel Corporation operates 460 bagel cafes in the U.S. Starbucks has 4,709
locations in over 20 countries.
As for competition within the industry, there are only a few formidable competitors that even
come close to matching Starbuck’s market shares. First, there is Gloria Jean’s 249 retail stores
owns by the Canadian franchiser Second Cup who also has 235 retail stores in Canada. Second is
Florida-based coffee chain Brother’s gourmet 250 franchises in the Chicago area. These two
competitors seem reluctant for further expansion due to Starbucks presence in all of their
markets. The last strong competitor is Seattle’s Best Coffee, who plans to leverage Starbuck’s
consumer education on gourmet coffees in order for easier time finding franchisees. Entering
Japan’s coffeehouse market means directly competing against the Pronto Corp. 95 outlets around
Tokyo. This company offers coffee in a relaxing environment much like Starbucks has to offer.
However, since Pronto Corp offers a different flavor of coffee, Starbucks’ espresso and latte
22

23. would pose as a differentiation factor to compete against this second largest coffee-bar chain in
Japan.
It is clear that Starbucks has few major competitors’ .Smaller competitors, however, pose
potential threats to the company. For example, the average Starbucks location draws on a
population base of 200,000. In San Francisco and Seattle, Starbucks draws on population bases
between 17,000 and 19,000 .In cities where Starbucks does not draw on small population bases,
smaller competitors can attract some of Starbucks' 200,000 person population bases. A slowing
industry market growth is another threat facing Starbucks. According to the market research firm
Allegra, compound market growth between 1997 and 2001 was 57% .From 2002 to December
2004, the market it estimated to grow 14%. Competitors are selling similar products, including
specialty coffees as well as high quality foods. In this slowing market, competition is high.
Forces 2:
Bargaining Power of Buyers:
Porter's next force is Bargaining Power of Buyers. Starbucks' customers are the buyers.
The Preferred Office Coffee Provider is a plan developed by Starbucks in which companies can
buy the ingredients and tools necessary to brew "the perfect cup of Starbucks Coffee," in large
quantities for their offices. Starbucks' typical customer buys small quantities of their products.
Products purchased at Starbucks are highly differentiated and unique from personal experience.
We know that there is an enormous selection of coffees at a Starbucks' coffee shop. Customers
will face no switching costs in switching premium coffee suppliers from Starbucks. For example,
Seattle's Best. This is a threat to Starbucks. Another threat to Starbucks is that their customers
have the ability to brew their own coffee. Starbucks has tried to offset this threat by offering
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24. Preferred Office Coffee Providers as well as directions on how to make the perfect cup of
Starbucks Coffee at home, called the "Four Fundamentals of Coffee" . The perfect cup of
Starbucks Coffee includes, of course, Starbucks' ingredients! It is clear that Starbucks customers
have some bargaining power in the industry.
Forces 3:
Bargaining Power of Suppliers:
Coffee is the world's second largest traded commodity .South and Central America produce the
majority of coffee traded in the world. Starbucks depends upon both outside brokers and direct
contact with exporters for the supply of green coffee .The supply of coffee is affected by weather
conditions, and the health of coffee trees. An over-crowded market will give the coffee suppliers
bargaining power. According to a 1996 Starbucks Case Profile, the price of the coffee bean could
rise in the future due to lower supply, and heightened demand. For the industry, these are alarm-
ing threats. The quality of coffee sought by Starbucks is very high, and Starbucks has traditional-
ly paid premium prices for its green coffee, at least $1.20 per pound .There are no substitute
products for the coffee beans Starbucks must buy. This is a potential threat to the company. Star-
bucks, however, has exhibited how little control its suppliers might actually have. In 2001, Star-
bucks announced new coffee purchasing guidelines, developed in partnership with The Centre
for Environmental Leadership in Business. These guidelines are based on the following four cri-
teria: Quality baselines, social conditions, environmental concerns, and economic issues. Only
suppliers who can meet Starbucks' coffee standards will be able to supply the giant company.
The supplying industry to Starbucks, therefore, has few companies. This is a potential threat.
Starbucks will offset this threat by paying a premium of up to ten cents per pound of coffee to
24

25. vendors based on how well their coffee meets Starbucks' standards. Starbucks has a degree of
control over its suppliers in an industry where it is possible for suppliers of premium coffees to
have an enormous amount of bargaining power.
Forces 4:
Threat of potential Entrants:
Porter's next force is the threat of Potential Entrants. While the threats of new entrance are possi-
ble, chances are few companies are willing to invest capital and human resources going head-to-
head with this industry giant. Starbucks, being the world leader in its industry, has controlled ac-
cess to distribution channels. Starbucks has exhibited this control over distribution channels by
setting guidelines for their suppliers to follow. Starbucks is Fortune's number one most admired
company in the food industry .One of their key attributes to success is innovation because Star-
bucks is constantly innovating and showing strong product differentiation in their industry. This
industry differentiation is an opportunity for Starbucks, and a threat to potential entrants. Statis-
tics have shown the industry to be slowing down, therefore making competition high and the
threat of new entrants low. Some believe, however, that there is a different kind of potential en-
try threat. Ted R. Lingle, executive director of the Specialty Coffee Association of America, be-
lieves that national food servers like McDonalds and Denny's could create strong coffee menus
and become "the strongest competitor for Starbucks' business.
25

26. Forces 5:
Threat of Substitute Products
Premium coffees products in supermarkets pose the greatest threat of substitutes to Starbucks
gourmet coffee, namely because they are available anywhere, anytime. In fact, Starbucks
management believes that their customers’ decision for coffee purchases depends primarily on
the basis of quality and convenience. It is undeniable that Starbucks has a competitive advantage
when it comes to quality, especially when compared to other generic coffee commodity. In the
premium foods and coffees industry, there are substitute products. According to Mary Coulter,
the best way to evaluate this threat is to ask whether other industries can satisfy the customer
need that this industry is satisfying (Coulter). Other beverage industries can satisfy the
customer's need for a drink, and other food industries can satisfy the customer's need to eat. This
is why image is very important for Starbucks, as well as the company's ability to innovate and
differentiate. Starbucks has added a line of tea, Taza teas, to their menus, and will be adding beer
to their menus in the future. There is a large threat of substitute products in a food and drink
industry. Starbucks has created an image, and has differentiated so that many of their substitute
products are part of the company. At a Starbucks coffee shop, a customer can eat ice cream, and
drink a Pepsi, while his friend drinks tea while eating a pastry.
• SWOT Analysis
External Environment:
Opportunities:
26

27. New Markets: The opportunity of attending in new markets is one of biggest opportunities of
Starbucks. Perhaps the market in China is the most important one which can offer Starbucks
improved profit. “With our progress over the past two years, we are now in a position to take
advantage of the global opportunity for Starbucks. Improvements in the U.S. business will allow
us to pursue disciplined new store growth internationally. While Starbucks now operates in more
than 50 countries (we added Portugal, Bulgaria and Poland in fiscal 2009), we are still in the
early stages of international growth. We expect future growth for Starbucks to come from deeper
expansion in markets where we already have a strong presence, such as the UK, Canada and
Japan. Our progress in China continues, and we believe it will one day be the largest market for
Starbucks outside the U.S.” (Schultz)
New Products and Services: New products and services can be retailed in their cafes, such as
Fair Trade products. These are some examples which Starbucks gained profit out of them. In
2004 the company created a CD-burning service in their Santa Monica (California USA) cafe
with Hewlett Packard, where customers create their own music CD. In fiscal 2009, Starbucks
lunched Starbucks VIA™ Ready Brew to the market.
Co-branding and Brand Franchising: Co-branding with other manufacturers of food and drink
is a potential opportunity for Starbucks. Brand franchising to manufacturers of other goods and
services is another opportunity for Starbucks.
Purchasing companies: By purchasing companies such as Seattle’s Best, XM Cafè, and Tazo
Tea, Starbucks used a different brand name to get business in different market niche.
27

28. Threats:
New Entrants: Every successful business causes new entrants in that business in hope that they
can also gain profit out of that business, and Starbucks is no exception. There can be new
competitors which would sell coffee with lower not original coffee beans but also with lower
price and that can reduce Starbucks’ sell.
Rises in the cost of coffee beans: There can be rises in the Coffee beans’ price in the market
which can easily affect Starbucks’ business more than anything else.
Natural Disasters: Starbucks has its own farm so that it can control the potential rapid changes
in the coffee beans’ price. Starbucks is exposed to the natural disasters which can threaten its
farms.
Possible changes in the customers’ favor: There is no guaranty that Starbucks’ coffee business
grow with this speed forever. Customers’ favor can change anytime.
US Market Saturation: While Starbucks has markets in 50 countries, US market is Starbucks’
biggest market with more than 78% of Starbucks’ retailers located in US. Until now Starbucks
has grown so fast in the world but with the advent of new competitors in the US market and with
the high number of Starbucks’ stores there, this market can become saturated sooner or later
unless Starbucks can keep itself with more and more innovations to keep its customers for ever.
• External Environment (EFAS)
28

29. External Factors Weight Rating Weighted Score
Opportunities
New Markets .18 4 .72
New Products and Services .14 4 .56
Co-branding and Brand Franchising .09 3 .27
Purchasing companies .11 2 .22
Threats
New Entrants .14 4 .56
Rises in the cost of coffee beans .08 3 .24
Natural Disasters .06 2 .12
Possible changes in the customers’ .09 3 .27
favor
US Market Saturation .11 4 .44
Total 1 3.4
Internal Environment:
Strengths:
Profitability: Starbucks Corporation has continued to be a very profitable organization, its
earnings in 2006 was in excess of $7.8 billion. 85% of the company’s total revenue was
generated from retail locations.
Global Presence: It is a global coffee brand built upon a reputation for fine products and
services. It owns and operates most of its retail stores around the World. There are over 16,635
Starbucks in over 49 countries in the world. This includes 11,068 (6,764 owned by Starbucks,
4,304 Franchised) in the United States. There are 1,000 in Canada and more than 800 in Japan.
Brand Recognition: It has an established logo, highly developed brand, intellectual property,
strong internet and media presence. It is one of the world’s most instantly recognizable brands
with a huge following.
29

30. Value: Co-branding with other manufacturers of food and drink is a potential opportunity for
Starbucks. Brand franchising to manufacturers of other goods and services is another opportunity
for Starbucks. By purchasing companies such as Seattle’s Best, XM Cafè, and Tazo Tea,
Starbucks used a different brand name to get business in different market niche.
Weaknesses:
Sustainability: Starbucks has a reputation for new product development and creativity.
However, they remain vulnerable to the possibility that their innovation may falter over time due
to the lack of internal focus and diversity in innovations.
High Operating Cost: The organization has very high expenses to maintain their operations
worldwide. Recent retail outlet closures and job cuts point to a persisting problem in reducing
costs.
Uneven Worldwide Distribution: The organization has a strong presence in the United States
of America with more than three quarters of their cafes located in the home market. It is often
argued that they need to look for a portfolio of countries, in order to spread business risk. They
are yet to enter the huge market in South Asia and as a result is seeing a dominance of
competitors there.
Product Pricing: Starbucks is considered to be an expensive option when compared to their
competition and this is directly influencing their success in many parts of the World.
Internal Environment (IFAS)
Internal Factors Weight Rating Weighted Score
30

31. Strengths
Profitability .15 4 .60
Global Presence .12 2 .24
Brand Recognition .16 4 .64
Value Internal Factors Strengths .11 3 Weaknesses
.33
Weaknesses
1. Profitability
sustainability .11 3 1. Uneven Worldwide Distribution
.33
External Factors 2. Brand Recognition 2. Product Pricing
High Operating Costs .09 3 .27
3. Global Presence 3. Sustainability
Product Pricing .13 4 .52
Uneven Worldwide Distribution
Opportunities SO
.13 4 .52 OW
Total 1 3.45
1. New Markets 1. Re-invest profits in New Markets 1. New Markets will balance
2. New Products and Services 2. Use its brand to sell new products distribution
3. Purchasing Companies 3. Expand global presence by 2. Lower prices for new products
purchasing companies 3. Purchase companies to survive
Threats ST WT
1. New Entrants 1. Offer better stake holder value 1. Entry into new countries before
2. U.S. Market Saturation 2. Ensure a strong foundation competition
3. Changes in Customer favor 3. Introduce to more people 2. Lower prices in Asia
worldwide 3. Engage the customers with constant
rewards
• TOWS Matrix
SFAS Table:
Strategic Factors Weight Rating Weighted Duration Comments
Score
S I L
S1 Profitability .13 4 .52 X
S2 Global Presence .10 4 .4 X
S3 Brand Recognition .14 4 .56 X
31

32. W3 Product Pricing .11 2 .22 X X
W4 Uneven Worldwide .11 3 .33 X
Distribution
O1 New Markets .17 4 .68 X X
O2 New Products and .12 3 .36 X X
Services
T1 New Entrants .12 4 .48 X
Total 1 3.55
• Recommendations:
- Since Starbucks has a very high profit, so it seems very encouraging chance to invest in
new markets such as China.
- They also must start thinking about the new product/services; they should use their brand
name which is attractive for most of the people; to establish new products and services as
well.
- Co-branding and franchising will be good opportunities for Starbucks to enlarge their
globalization. Purchasing companies will expand their global presence.
- US market is Starbucks’ biggest market with more than 78% of Starbucks’ retailers.
Starbucks should start thinking about new markets and countries that haven’t been
introduced by Starbucks.
- Even thought Starbucks is a very recognized brand, but the price is also playing a role.
Starbucks should produce new products with lower prices than the usual process to
ensure productivity.
- Starbucks are always available in the malls. But we recommend that Starbucks should
have some branches to the working areas, studying areas. Universities are lack of coffee
32

33. shops, but there will be no waste if Starbucks try to open in most strategic locations near
by these areas.
• Conclusion:
Weaknesses and Threats are consequences of any natural business. But Starbucks is still on the top and it
has proved that they are qualified to stay as the best coffee producers till the moment. Their main strength
was the huge profit, and their main weaknesses were about product pricing and uneven worldwide
distribution. Competitors are not affecting Starbucks that much since Starbucks is still in the top and it
knows the right flow and strategy to stay on the top. Starbucks brand has been known to all over the
world, it’s a globalized business and everyone appreciate their products and services and; that’s why
customers don’t mind to spend their money to purchase Starbucks products even thought their prices are
considered expensive. But Starbucks has to find a strategy to build the foundation of products with lower
prices to ensure productivity and customers’ loyalty.
33

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35

36. Appendixes
Starbucks Corporation Fiscal 2009 Annual Report
36

37. 37

38. Starbucks Swot Analysis:
38

39. Starbucks is known around the world for bringing gourmet coffee and the coffeehouse
experience to the masses. As the company grew from a single store in Seattle‟s Pike Place
Market to thousands of stores worldwide, it has kept its mission statement clear and concise: “To
inspire and nurture the human spirit- one person, one cup, and one neighborhood at a time”
(Starbucks, 2009). Starbucks is recognized for being environmentally responsible, and has a
separate mission statement to address this progressive, important aspect of their business and
success: “Starbucks is committed to a role of environmental leadership in all facets of our
business.” Underlying both of these broad concepts is a set of core values that the company uses
as a foundation for all their business practices. Starbucks is committed to serving high quality
coffee purchased from growers in an ethical manner, treating employees as partners in business,
making human connections with their customers, creating store environments that are
welcoming, being a responsible neighbor that is involved in the community and providing
shareholders with the rewards of success (Starbucks, 2009)
Starbucks‟ success has resulted from the company living these values consistently. However, the
world has become a very different place than it was in 1971 when it got its start. A reevaluation
of the company‟s mission through the tool of SWOT analysis will provide a more accurate
portrait of where the company stands today. The company‟s strengths are its commitment to the
people and to the environment, but it faces serious weaknesses in the form of over-exposure,
compromised brand image and high prices. There are good opportunities for Starbucks to grow
its business through expansion into foreign markets and attract investors with the relatively
cheap stock prices, but it must addresses the threat that it faces from its lower-priced
competitors, specifically McDonald‟s, as the country continues to sink into economic recession.
39