Starbucks Case Study and Analysis

1. Starbucks strategic management
MORIBA TOURAY

2. Presentation Outline
 Introduction to Starbucks
 Business Description
 Industry Overview
 Company Overview
 Key Strategic Environment
 Industry Analysis
 Internal Analysis
 SWOT Matrix Framework
 Starbucks Strategies
 Strategic Implementation of Action Plan
 8. Implementation and control
 Recommendation

3. About Starbucks
 Overview
 Mission
Vision
Long-term Objectives
 Corporate Values and
Business Principles

4.  Established in 1971 at Seattle, Washington
 Famous for its quality fresh-roasted coffee beans
and stylish atmosphere.
 Over 9,000 stores worldwide
 Product lines include :
− beverages (coffee, Tazo tea, soda, juices)
− pastries
− whole coffee beans
− coffee-related hardware and equipment
− merchandise (mug, CDs)
Overview

5. Starbucks Mission
 “To inspire and nurture the human spirit -
one person, one cup and one neighborhood
at a time.”
 Creating a culture of warmth and
belonging, where everyone is welcome.
 Acting with courage, challenging the status
quo
 Being present, connecting with
transparency, dignity and respect.
 Delivering our very best in all we do,
holding ourselves accountable for results.

6. Starbucks Vision
 “To establish Starbucks as the premier
purveyor of the finest coffee in the world
while maintaining our uncompromising
principles while we grow.”

7. Starbucks Value
 Creating a culture of warmth and
belonging, where everyone is welcome.
 Acting with courage, challenging the
status quo
 Being present, connecting with
transparency, dignity and respect.
 Delivering our very best in all we do,
holding ourselves accountable for results

8. Starbucks Objectives
 Premier purveyor of the finest coffee in the
world
 Maintain Uncompromising principles
 Develop enthusiastically satisfied
customers all of the time.
 Contribute positively to our communities
and our environment.
 Recognize that profitability is essential to
our future success.
 Starbucks is committed to a role of

9. Potential Issues
 A number of problems at home and abroad
 At home, Starbucks is facing market
saturation
 Economic conditions in the US and certain
International markets
 Market saturation comes store
cannibalization a situation where one
company store takes away business from
other stores
 Starbucks needs to find a way to convince
more customers to visit stores more often.

10. Industry Analysis
 Specialty coffee sales are increasing by
20% per year and account for nearly 8% of
the 18 billion dollar U.S. coffee market.
 Coffee statistics show that among coffee
drinkers the average consumption in the
United States is 3.1 cups of coffee per
day.
 Independent coffee shops equal $12
billion in annual sales

11. Industry Life Cycle

12. Market Share
Concentration

13. Starbucks PESTLE
Analysis
 Political Influences
-Relationships between U.S. and
countries producing coffee beans
− Environmental regulations
− Industry-specific regulations
 Economic Influences
− Demand for food and beverages
− Customers’ buying power
− Exchange rate & taxation

14. Starbucks PESTLE Analysis
 Social Influences
- Trend
- Consumer preferences
 - Changes in lifestyle and occupation
 - Education
 Technological Influences
-Advances in manufacture
-Biotech and agricultural development
-IT developments

15. Starbucks PESTLE Analysis
 Legal Factors
- Environmental rules and regulations
- Environmental disasters in countries which
produce coffee beans
- Global warming and other Environment
issues
 Environmental Factors
- Introduction of stricter customs and trade
regulations
- Licensing regulations

16. SWOT Analysis

17. Porters Five Forces

18. Starbucks Competence

19. Common Size Financial
Analysis
 Risen about 18% over the past 12 months
an impressive gain considering the S&P
500 is up just 2% during this same
timeframe.
 In 2018, Starbucks' net earnings amounted
to 4.52 billion U.S. dollars, up from
approximately 2.88 billion U.S. dollars the
previous year.
 Corporation reported earnings amounting
to approximately 4.52 billion U.S. dollars.

20. Financial Ratio

21. Internal Factors Evaluation
Matrix
 Strong brand image.
 Extensive global supply chain.
 Moderate diversification through
subsidiaries
 Strong culture
 Attention to detail
 Innovative and risk taking

22. External Factor Evaluation
Matrix
 Rising mobile purchases (opportunity)
 Technology transfers to coffee farmers
(opportunity)
 Rising availability of specialty coffee
machines for home use (threat)
 Saturation of the coffee industry

23. Starbucks’ Strategy
Rapid store expansion strategy
• Domestic store expansion
− A three-year expansion strategy
− “Starbucks everywhere” approach
• International store expansion
− Company-owned and company-operated stores or licensing
− Created a new subsidiary, Starbucks Coffee International
− Expanded its consumer products channel in South Pacific region

24. Starbucks’ Strategy
• Employee Training and Recognition
− Systems to recruit, hire and train baristas and store managers
 screening
 training programs
 awards for partners
• Real Estate, Store Design, Planning, and Construction
− A broad range of store formats (the right image and character)
− A “stores of the future” project team
− High-traffic, high-visibility store locations
− Control of average store opening costs
− Wi-Fi availability at stores

25. Starbucks’ Strategy
Product Line
•Wide range of products choices
•Special product promotion
•Selling music CDs
•Joint ventures
PepsiCo
Dreyer’s Grand Ice Cream
 Jim Beam Brands
•Acquisitions
 Hear Music
 Ethos Water
•Starbucks Cards
•Partnership with Bank One

26. Starbucks’ Strategy
Coffee purchasing strategy
• Building relationship with growers and exporters, checking on
agricultural conditions and crop yields, and searching out varieties
and sources that would meet Starbucks’ standards.
• Using fixed-price purchase commitment and purchasing coffee future
contracts
• Contributing to the sustainability of coffee growers and helping
environment conservation
• Purchasing and marketing Fair Trade Certified coffee
• Promoting coffee cultivation methods that protected biodiversity and
maintained a healthy environment

27. Industry and Competitive
Analysis
Generic Competitive Strategy

28. Market Penetration Strategy

29. Starbucks Generic Value
Chain
 Primary activities Inbound logistics:
Sourcing coffee from diverse coffee beans
producers.
 Operations: They have operation in 75
countries
 Outbound logistics: Most of its product
mix are sold in-store and some through
large box retailers.
 Marketing and Sales: Investment in
marketing activities

30. Starbucks Generic Value
Chain
 Service: Providing supreme level of
customer services
 Human Resource Management: Great
benefits, and employee empowerment
 Technology development: Investments in
innovative technologies
 Procurement: Products from a diverse
group of suppliers and has fixed contracts
with some of the suppliers.

31. VRIO Analysis

32. Strategic Implementation Action
Plan

33. Evaluation & Control
 Compare performance with desired
results and provides the feedback
 Determine what to measure
 Establish Standards of Performance
 Measure Actual Performance
 Compare Actual Performance with the
standard
 Take Corrective Action

34. Recommendation
 A re-invigoration of “Just Say Yes” and
“Exceed the expectations of your customers”
 Slow down the rate of new licensed stores.
 Marketing campaigns featuring the western,
high-quality, and “hip” image of Starbucks
 Starbucks should capitalize on the growth
opportunities in the Asia Pacific region

35. QUESTION?
END