Professional Documents
Culture Documents
TABLE OF CONTENTS
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CONTENTS
Background Problem Identification Main Issue Narrow SWOT analysis Functional Area Analysis Alternatives Recommendation Implementation
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2 7 7 8 16 47 53 57
BACKGROUND
About Starbucks: Starbucks is one of the finest coffee stores, popular among its customers for its aura with a very comfortable atmosphere to relax and the first rate music it plays. As in the 1990s, it is a store which has been almost everywhere throughout the United States and Canada. Starbucks was founded in Seattle by Gerald Baldwin, Gordon Bowker, and ZievSiegl in 1971. It started its operations as a gourmet coffee bean roaster and distributor. Howard Schultz joined the company as a member of their marketing team in 1982 and urged the partners to consider opening an Espresso bar alongside selling coffee. The company opened its first Espresso bar at its Seattle store. However, the partners didnt want to take the idea of expanding its Espresso bar line forward, as to them it resembled stepping into the fast-food business instead of focusing on their own business of roasting and distributing. In 1985, Howard Schultz opened Il Giornale after he left Starbucks. Il Giornale was an espresso bar that sold coffee and assorted coffee beverages made exclusively with Starbucks beans. Two years later, Schultz bought the former Seattle Starbucks company, six stores and roasting plant, for $3.8 million. Schultz now was in control of Starbucks and with new investors, began building a global business which reached sales of $3.3 billion in 2002 and was acclaimed one of the top 100 growing global brands. Now Howard Schultz had every opportunity to implement his dream concept of taking the Italian espresso bar to ever corner of the world through Starbucks. By fall 2002, the company was specializing in three sectors --- assorting and roasting, selling coffee, selling Frappuccino globally through other retailers. Though Starbucks made up a relatively small percentage of the coffee industry in North America, it had successfully been able to re-energize the entire coffee industry. The Starbucks Effect was a term that stood for every excellence in the coffee industry not only in terms of selling products of premium quality but also in terms of the delivery methods. Starbucks did more for its customers than just providing them with good, differentiated coffee, it also made its
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With the opening of its first store in January 1999 in the World Trade Centre in Beijing, China, Starbucks added the Peoples Republic of China to its growing list. In the next three-and-a-half years, it had expanded to 35 shops, focused in and about Beijing and Shanghai. The reception to Starbucks in a culture grounded in tea was remarkably successful. Although Starbucks was heavily criticized for opening an outlet in a souvenir shop in Beijings Forbidden City in 2001, the shop flourished. The companys entry into Continental Europe had been anticipated for years, but with much trepidation. Europes longstanding traditions of coffee consumption and independently owned and operated coffeehouses constituted an established market which was not considered open to American entry. Starting in Switzerland and Austria in 2001, the company then expanded into Spain, Germany, and Greece in 2002. Although many critics arguedas they had in Japan
Problem Identification
Starbucks was facing anti-globalist movement because of rapid global expansion strategy. Starbucks was criticized as a ubiquitous band i.e. high visibility with enormous stores. Conflict in higher management between CFO and Director of store operation. Starbuckss massive expansion strategy leaded to cannibalize their existing individual stores sales. The operating cost was very higher because of the enormous number of store. The Stock value was going down from 2000 to 2002 that hampers the shareholders interest. The strategy of Starbucks of being wholly owned operation incurs high fixed cost. Starbucks was criticized as Cultural Imperialized because of rapid aggressive expansion policy. The service quality and employee motivation and employee were decreasing over time. Some employees were underpaid and Starbucks was sued for that.
ISSUE
How could Starbucks increase their sales with keeping their mission intact and ensure consumer satisfaction?
Starbucks was involved with corporate social responsibility. The need for recognition in terms of having a socially responsible image is becoming popular and Starbucks doesnt lag behind in this sector. Starbucks conducts business in ways that produce social, environmental and economic benefits to the communities where they operate. This tags Starbucks as having corporate social responsibility. As a result, consumers are not only getting their favorite products from Starbucks but also the feeling of being attached to a company with strong values.
Starbucks had low advertising costs. Starbucks was named by Interbrand one of the most recognizable global brands, although the company still spent less than $20 million per year in advertising.
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Weaknesses:
Store managers and employees were overworked and underpaid. To make sure that customers get the Starbucks Experience, the employees had to continuously work on keeping their customers pleased and engaged. The industry was notoriously deficient in terms of compensation and benefits which added to the difficulty of retaining employees. Starbucks had to invest a lot to keep the customers happy. The maintenance and development of this quality experience required a strong organizational commitment. To make sure that the employees continuously pay attention to keep the customers engaged, highly extensive trainings were carried out to keep the employees motivated. But this involved a lot of investment which goes worthless if the employees are not retained. The Price of Starbucks coffee was grossly overpriced. One of the weaknesses of Starbucks is its grossly overpriced coffees. Whilst the company targets the affluent executives, young and old, as its primary market, the current economic conditions make the customers become sensitive to prices of commodities and products. The frequency of customer visits may be reduced due to the current economic situation. Hence, Starbucks current price strategy may seem to be out of place and needs to be changed. Image as a high-end coffeehouse is diminishing. Apart from the pricing strategy, the Starbucks coffeehouses image as luxurious Third Place seems to be vanishing. With stores literally facing each other, the lush experience the customers wanted appears to be diminishing. It is increasingly becoming like a fastfood chain, only the prices of its products are much higher. Possibility that their innovation falter over time. Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.
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Opportunities:
Starbucks can expand its international business even further. The company has a reputation of international success so they can consider entering the markets of other countries which they have not ventured yet. Global consumer products segment is doing well The company can capitalize more on the global consumer products segment whilst recovering from the other two business segments. The international market is also showing a good promise for Starbucks. The economies of the emerging markets are growing at a rapid pace. International market is showing a good promise The company can capitalize on this growth by aggressively expanding into these countries. Using its fundamental strategies indicated in the previous sections and the recommendations at the end of this paper, the firm can increase its revenue and profit by penetrating into the emerging markets. New products can be announced New products and services that can be retailed in their cafes, such as Fair Trade products can enhance the sales.
The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge. Co-branding with other manufacturers can be a good opportunity. Affiliation with co-branding with other manufactures of food and drink, and brand franchising to manufacturers of other goods and services both have potential for the expansion.
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FUNCTIONAL ANALYSIS
Functional Analysis is an integral part of a case analysis. It enables us to have a very good analysis of the company, the industry, the competitors it will be dealing with and many other factors. Porters five forces, life cycle, financial analysis, companys HR strategy and country risk analysis and many other factors are analyzed so that we could have a complete scenario and take a good decision.
The Porters Five Forces is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position youre looking to move into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning tool. Conventionally, the tool is used to identify whether new products, services or business have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations.
Threats of new Entrants: For most of the industries in the world the threat of new of new entrants exists. Analyzing this we have to consider some factors which are described below with the proper use in the case. Time and cost of Entry:
If anyone looks that any industry is making a sustainable profit they would surely want to enter the market. But entering into the market is not easy. One of the barriers is the time of entry means when they are entering the markets. The companies have to see whether it is too late or it is the right time to get into the industry. In the case the coffee market has become saturated with many players playing the game. There is also a recession going which is wracking the economy. For the new entrants considering entering the market the findings is not very satisfactory or motivating. On the other hand, cost is another issue to be taken into account. Cost of getting into a industry plays an important role and determine the fact of a firms entrance. It also serves as a barrier for the new firms to enter. It needs equipments and machineries, plant set up, licensing etc which might be costly. It might need a huge investment for a company to get in. There is also less cost associated with the coffee industry for the coffee shops, specialty places etc.
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Product differentiation refers to-that that the product of the company is differentiated or not means the company is providing a different product from the other products in the market or not. The companys product might be differentiated in quality, price, customers specifications etc. It plays an important role for a new entrant who is considering entry into the market. If the companys product is differentiated it gets difficult for a new company to come and start taking the market share as the existing product is defined and established in the market. In the case the product is differentiated. Starbucks has defined themselves for both premium product & service. They stood not only for good coffee, but especially for the dark roasted flavor profile that the founders were passionate about. They offer something so far superior that it takes a while to develop their palates, and it created a sense of discovery and excitement and loyalty that the customers feel a bond with them. For a new company who enters into the market have to establish itself and define itself as a premium brand which will take a long time and it will not be easy. Specialist Knowledge:
Specialist knowledge is other important factor that constraints the firm to enter into the market Firms with special knowledge can enjoy long time freeness from the threats of new comers. The Starbucks coffee are made exclusively of Starbucks beans and their service is way superior compared to the other coffee shops. They specially give their employees training on treating customers and maintaining high standards of service to give the customers highest satisfaction. This is giving them an advantage over others. Economies of Scale:
Economies of scale are other important factor that constraint the new comers in entering any industry. If the firms in the industry have achieved economies of scale in their production it becomes difficult for the new comers to get into the market. For a new comer it is very difficult to achieve economies of scale instantly, it takes them a long time to achieve. As they have a lot of stores flourishing all over they can achieve economies of scale in the overall sales but if we consider individually it becomes difficult for them to achieve economies of scale. With so many stores flourishing they were able to achieve economies of scale in the marketing and promoting cost. Capital requirements:
For new entrants in an industry, it is important for them to take into account the capital requirement to establish the business. For many businesses it is high capital requirement that constrain new firms to enter. The capital requirement in this industry is moderate. Any new firm having an average amount of capital can enter the business but to sustain in the long run the
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Distribution channel of a country plays an important role for the new entrants to consider It is not easy for a new firm to get access in the distribution channels. As the new firms are already in the business they have a access to different channels, for a new firm starting it is difficult to set up the distribution in order to reach all the customers. For a new firm entering into the market it will be really difficult for them to get a distribution channel like Starbucks. Starbucks have made themselves available in everywhere, anywhere you go. Their strategy of being available everywhere has paid them off. Being available in so many areas in short distances is not easy for a new firm to do. So the new firms will face difficulty in accessing channels. Switching cost:
The cost associated for consumers to switch from one product to other is referred to switching cost. The new entrant should also see if there is any switching cost for the consumers or not. If there is switching cost for consumers to switch to new products the consumers will barely shift if they dont have any problem with the product. In the case there is no switching cost for customers, the customers will switch if they get better product or service from any other firm. If the new firm has something better to offer e.g. better coffee, better taste, better or superior service the consumers will definitely shift to the newer stores, although it will be a difficult task for them as Starbucks provides a unique service so far different from other traditional coffee stores. Expected Retaliation:
Existing firms retaliate when they are threatened by the new comers. They try to retaliate them by different policies and sometimes play unethical and unfair games. Starbucks already play unethical games in real estate by not allowing other competitors to enter in their territory by paying premiums on real estate prices driving the prices up. For a new firm it will be difficult for the competitors to enter and start playing the game, Starbucks will definitely retaliate and try to make the new entrants weak. Cost Advantages:
Cost advantage is another form of barrier which restricts new entrants. It can be a very important weapon for a company who enjoys this advantage. Companies with this advantage can drive out their competitors anytime they want, so the threat for new comers increases if there are firms having the cost advantage. Starbucks have a cost advantage. They have pulled out all the middlemen of the supply chain which enable them to enjoy the cost advantage. Any new firm also have the opportunity to take this advantage because the farmers of coffee are ill paid and if they pay them well the farmers will become loyal and thus it can minimize their cost.
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The technology the firms use may make the firm apart form the others. The firms might have some technology that it is difficult to achieve for others.. If a firm in the industry have this kind of technology it will definitely enjoy the power. In the case, not much is talked about the use of any technology but we can assume that it is not a very high technology oriented industry. So the risk for the new entrants is minimum. New comers can enter into the industry and try to play the game with the existing players as there is no company who has the technology to drive others out. Government Policy:
High barriers to entry restrict new players to come in the field. These barriers mainly refer the barriers of the country to be entered. It could be political, legal barriers e.g. it could be tariffs, quotas, banned, and other restrictive policies taken by government etc. In U.S.A there are no particular barriers for a new firm to start a coffee store business. Any new entrant can enter into the business as no barriers are there for them. The U.S.A government has always been supportive to the new business until it doesnt violate the laws and policies of the government.
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Bargaining Power of Suppliers: Bargaining power of suppliers is another tool for testing the five forces. It allows you to have an idea about the suppliers, their influence in the industry, number of suppliers in the industry etc. Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. The considerations in analyzing the bargaining power of suppliers are: Number of Suppliers in the industry:
The number of suppliers in the industry decides the power and influence of suppliers. The lower the number of suppliers the higher the power they can have and consequently number of suppliers high in numbers means they have less power. In the given case there are not much given about the number of suppliers, though the analysis there are high number of suppliers who can have influence on the coffee industry. First of all, there are large number of suppliers which has driven the price down of coffee and the farmers are not well paid. The suppliers supplying are also high in numbers that means they dont have the bargaining power. There are large numbers of suppliers. Their strategy of being socially responsible helps them to get the suppliers in their hands.
Uniqueness of Product:
Uniqueness of product is other dimension of bargaining power of suppliers. If the suppliers are unique in their product or service they can exercise influence on the companies. In the case, the suppliers are not unique. The raw materials are easily available. So they dont have any power over them. Starbucks can switch suppliers if they see it is no more feasible to buy materials from them. Size of Suppliers:
The size of suppliers is another important factor. It plays a major role in determining whether who will be influential-the supplier or the buyer. If the supplier is huge enough that it can survive without you and it doesnt affect its business, the supplier will have higher bargaining power. If the firm you are operating is small compared to the size of your supplier the supplier will be playing with you in prices, in supplying raw materials etc. In the case, there are no suppliers who can enjoy such a power. Starbucks has much higher influence in its suppliers because its size is very big compared to its suppliers and it is playing a major role buying the raw materials from them. If the firm has the ability to substitute their suppliers the firm can have more power on their supplier. In this case, Starbucks position itself in sustainable economic initiatives with
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If there is high switching cost of the suppliers products the supplier power will be high. In the case, there is no switching cost of suppliers so if any supplier or suppliers play unfair game or there is conflict in negotiation they can always move to other suppliers. Threat of forward integration:
Suppliers can become competitors by making the customers products. There is always this threat. In the case there is no chance of the suppliers becoming a competitor as the farmers are already poor, they dont get well paid for what they are doing. So there is no chance of the suppliers to become their competitors. Threats of substitutes:
This is affected by the ability of your customers to find a different way of doing what you do, if you supply a unique product that produces an important process, people may substitute by doing the process manually or by outsourcing it .If substitution is easy and substitution is viable, then this weakens your power. Substitutes Performance:
If the substitute of the product serves the same utility or a better performance the customers are more likely to switch that product. The better performance of substitutes could be a threat for the company producing the product. From the point of view of consumers, there are a number of substitutes for coffee. These include tea, soft drinks, different types of shakes, energy drinks, caffeine, milk etc. Switching Cost: If the customers have no switching cost and the performance of substitutes are satisfying for the consumers they will definitely switch to substitutes. Customers might be switching to different substitutes if they provide them with the same utility. As there is o switching cost the customer might be switching to other products which will provide them the same utility. Bargaining power of customers: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to
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The number of customers is influential in bargaining power of buyers. If you deal with few, powerful buyers they are often able to dictate terms to you. Higher number of buyers means lower power to them. As the coffee industry has large number of customers they will have lesser impact on its sellers. Threat of backward integration:
There is a threat of backward integration as well by the buyers. If buyers see that the industry is attractive and it can bring profit they might try to enter into the industry and take the market share. Undifferentiated products:
If the products are not differentiated the buyers are more likely to shift to any products anytime. They will be inconsistent in buying the same product. Starbucks have differentiated their products and service quite strongly (by brand, flavor and superior service and so on) and the fact that major buyers generally need to offer a wide range of products for their own customers, should also tend to weaken buyer power. Buyers ability to substitute:
If the buyers can easily substitute to other brands the firm can never win from them. In the coffee market the buyers are able to substitute to any other brand or product they want. The power of buyers is high considering this factor. It will be high unless the consumers become brand loyal. Price sensitivity:
Price sensitive customers tend to change brands more rapidly than the customers who are less sensitive to prices. The US consumers are not price sensitive rather they are quality sensitive. As they are price insensitive they have lesser power in their hands to influence the coffee market.
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Number of Competitors:
The important thing here is the number and capability of your competitors if you have many competitors, and they offer equally attractive products and services, then youll most likely have little power in the situation. If suppliers and buyers dont get a good deal from you, theyll go elsewhere. On the other hand, if no-one else can do what you do, then you can often have tremendous strength. Starbucks provide the customers with superior service and premium brands of coffee which they cannot find in any other coffee store. It has taken them to a new world of coffee stores, it has changed the means the coffee store for them making them feel the store as a third place. This has brought them a strong position in the market. High Exit Barriers:
High exit barriers make an industry more competitive as once a company entering into the market will not exit easily because high costs are associated if they shut down. It is notable that there dont exist high exit barriers for firms. We have seen that earlier Starbucks was divested by the original partners because they wanted to cash out from their company. High Fixed costs:
The rivalry remains among the firms as the there are high fixed cost associated and no one wants to be driven out. Starbucks have high investments in stores. They have opened many stores like mushroom in the market incurring them high fixed cost in real estates and setting up stores. Lack of Differentiation or switching costs:
If the products are not differentiated the customers will be switching from one product to another. It gives rise to more rivalry. The competitors want to win their customers by marketing, playing price war and many efforts are taken. In the case Starbucks have differentiated them tremendously in the market. They have positioned themselves superior to any other traditional store in the market. Customer Loyalty:
If the customers are loyal firms dont engage themselves in high rivalry. But as the customers are not always loyal there rises the intensity of rivalry. They take different measures to gain customer loyalty.. Starbucks have taken all the measures needed to make a strong and loyal customer base. They try to develop satisfied customers all the time and they apply high standards
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When analyzing the specialty coffee industrys sales growth from 1990 to 2002, as illustrated in exhibit 1, we can see that the companys product are in growing stage. Starbucks is growing at a rate of 25% per annum. This suggests that the specialty Starbucks coffee is near the growth stage in the industry lifecycle. Having pinpointed where we believe the specialty coffee industry is in the lifecycle allows us to assess the likely future evolution of the industry.
Sales
Time
When analyzing the Starbucks sales growth from 1998 to 2002, as illustrated in Appendix 1, we can see that Starbucks experienced growth in total sales between 1998 and 2002. We can compare the two and pose a hypothesis as to where the specialty coffee industry is in this life cycle. This suggests that the specialty coffee industry is near growth stage in the industry.
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Sales
Time
Coffee industry is a huge industry and as the world population is increasing having sufficient income the demand is on the increasing side. Coffee is an ever growing industry as it is taken as refreshing drink all over the world. Its demand will always be increasing. The case also suggests that the coffee industry has reached its saturation stage in the US market.
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In the year 2002, their current asset was 1.57 times to cover the current liability. The Current ratio was been declining from 1998 to 2002 and the relative change in current asset was higher than the change in current liability.
2. Quick Ratio= (Current Asset-Inventory)/Current Liability Year Quick ratio 1998 1999 2000 2001 2002 1.0818942 0.818471 0.823227 0.836964 1.087256
In the year 2002, set their current asset excluding inventory were 1.08 times to cover the short term obligation. From 1998 to 2002, Quick ratio was not changed by a significant amount.
3. Working Capital = Current Asset-Current Liability Year Working Capital 1998 157.8 1999 135.3 2000 146.6 2001 148.7 2002 310.1
In the year 2002, Current Asset is exceeded current liability by $310.1. The Working Capital was increasing from 1998 to 2002.
Most Liquidity ratio is increasing the refers the liquidity position of Starbucks is good enough to meet the short term obligation.
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1998
1999
2000
2001
2002
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In the year 2002, the company has sold out and restocked the inventory 5.13 times on average. Inventory turnover was growing from 1998 to 2002.
5. Total Asset Turnover=sales/total asset Year Total asset turnover 1998 1999 2000 2001 2002 1.318191 1.346747 1.459909 1.431041 1.434447
In the year 2002, $1 asset generated $1.43of sales. The asset turnover was increasing from 1998 to 2002.
6. Fixed Asset Turnover= Sales/Fixed Asset Year Fixed asset turnover 1998 1999 2000 2001 1.9964912 1.947806 2.107423 2.107231 2002 2.27574
In the year2002, $1 fixed asset generated $2.27 of sales The fixed asset turnover was increasing from 1998 to 2002.
7. Days Sales Outstanding=365/Receivable Turnover Year Days sales outstanding 1998 1999 2000 2001 2002 14.224039 10.29998 12.80584 12.45602 10.83159
In the year 2002, Starbucks took 10.83 days on an average to collect the A/R . The average collection period was decreasing from 1998 to 2002.
8. Average payment period= 365/Payable Turnover Year Days Payable Outstanding 1998 1999 2000 2001 2002 13.917246 12.13926 12.35328 17.62307 15.09319
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9. Cash Conversion Cycle=Days in inventory+ Days Sales O-Average payment period Year Cash conversion cycle 1998 1999 90.594606 86.48134 2000 2001 2002 76.9891 67.41967 66.89987
In the year 2002, it took 66.89 days to recover cash investment on an average. The cash collection period was declining from 1998 to 2002.
Among the asset management ratios inventory turnover ratio, asset turnover ratio and fixed asset turnover ratio was increasing that refers the efficient use of asset. The increasing trends in DSO, Average collection period, and the cash conversion period also refer the effective collection procedure.
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In year 2002, the companys debt was 3.5% of total asset. The debt to asset ratio was almost same in 1998 and in 2002. 11. Times interest Earned (TIE) =EBIT/Interest Expenses Year TIE ratio 1998 -15.380 1999 -21.466 2000 -29.901 2001 -26.028 2002 -34.269
In 1998 to 2002, the companys interest income exceeded the interest expenses.
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Profitability Ratio: 12. Gross profit margin=gross profit/sales Year Gross profit margin 1998 0.365 1999 0.470 2000 0.608 2001 0.768 2002 0.968
In the year 2002, the gross margin was 96.8% of total sales. The gross sales margin was increasing dramatically in 2002 from 1998.
13. Operating Profit margin = EBIT/sales Year Operating Profit Margin 1998 0.083 1999 0.093 2000 0.097 2001 0.106 2002 0.097
In the year 2002, the operating profit was 9.7% of total sales. The operating profit margin was increasing from 1998 to 2002.
14. Net profit margin= Net income/sales Year Net profit margin 1998 0.052 1999 0.060 2000 0.043 2001 0.068 2002 0.065
The net profit was 6.5% of sales in the year 2002. The net profit margin was also increasing from 1998 to 2002.
The profit margin shows that the income is rising of the company. But the gross profit margin is relatively much higher than the operating profit margin and net profit margin which indicates the higher operating profit.
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In the year 2002, the shareholders have earned $12.5 for every $100 investment in the Starbucks. The return on equity was increasing from 1998 to 2002.
16. Return on Asset= Net income/Total Asset Year ROA 1998 0.069 1999 0.081 2000 0.063 2001 0.098 2002 0.094
In the year 2002, every $100 worth of Total asset were generating a net profit worth of $9.4. The ROA was increasing from the year of 1998 to 2002.
Du point equation is not only reflecting the income. Besides income quality this ratios show the quality of asset utilization and structure of finance. So Growth in ROA and ROE refers the good income generation capacity, good asset management and healthy financial structure of the company.
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In the year 2002, common stockholders had a profit of $.558 per share. The Earning per share is increasing from 1998 to 2002.
Market to Book ratio= Market price per share/Book value per share Year market to book ratio 1998 4.085 1999 4.689 2000 6.631 2001 4.084 2002 3.314
In the year 2002, market price is 3.314 times higher than the book value per share. The Market to Book ratio was increasing from 1998 to 2002.
P/E ratio=Price per share/EPS Year P/E ratio 1998 47.433 1999 44.309 2000 80.749 2001 31.121 2002 26.603
In the year 2002, shareholders were willing to pay $26.603 for each $1 of reported earnings. The P/E ratio was declining rapidly from 19998 to 2002.
Even though the earning per share is increasing the decline in market price which leads to lower P/E ratio indicates that the lower dividend or non-payment of dividend to the shareholders so that they are not interested in the companys stock.
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Forecasting Demand:
Consideration: Product Demand: The demand of coffee in the North American market is saturating. But the demand of Starbucks coffee is increasing day by day. It is for the premium product and service they are providing to their customers. Their stores have changed the traditional means of coffee shops. They make the customers feel that they are in a third place where they can escape, reflect, read, chat or listen. Starbucks average sales growth rate is 25% per annum where the other companies have reached their saturation. So their product demand is increasing. Technology: There is no special technology used in the coffee industry with which the companies can be advanced from another. There is also not much said about the technological utilization in the coffee industry or in Starbucks. Financial Resources: As a Public limited company it could be assumed that they were solvent in financial resources. Their initial public offering took place in 1992 (NASDAQ:SBUX). It also undertook a public offering in Japan as a JV. These public offerings enabled them to raise money from the capital market and invest for their expansion. They were financially sound enough to open so many stores like mushroom. If we look at their balance sheet we will see that they had a very little debt compared to their equity which refers their financial stability and soundness. Absenteeism / Turnover: Starbucks took many policies to ensure that they maintain their employees and retain them in the long run. They were the first in the US history who gave stock ownership plan as a privately held company. They also offered health care benefits for the employees who worked more than 20 hours in a week per week. They believed that if employee retention was improved and quality of service preserved it pays off for the company. Later in the case we see that the employee turnover is increasing and there is lack of motivation working in the employees. Organizational growth: The company has grown rapidly since it started its operations. The companys main means of expansion was to establish stores to consumer foot steps such as commuting routes, corner
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Management Philosophy:
Starbucks became known as ubiquitous which means easily available. The management especially Howard Schultz focused on building a global business which will be acclaimed as one of the top 100 growing global brands. Their concept was to build Starbucks in every corner of every city block of the world. They also redefined the coffee stores by their premium coffee and superior service which was totally different from conventional coffee stores. They had a strong belief in motivating and retaining employees with their benefits. They believed that their benefits would pay off if the employees are retained and they provide good service. They provided their employees health care benefits, stock ownership plan which were quite indifferent in the industry. Starbucks is also taking part in CSR. They have taken three programs to support their CSR initiatives-Procurement, Direct support, Conduit Brand Development. In the initiative of procurement they are paying premium above the market price or New York C. They are also providing pre harvesting and post harvesting financing to the coffee farmers. Starbucks was also a regular donor to a relief organization called Care who tries to support farmers. Another CSR initiative was Conduit Brand development. They built up some brands which would directly support causes for sustainable development. Orion Smith, the CFO of Starbucks believed in strict organizational discipline, including careful use of the Starbucks brand and insisted for many years on company-owned and operated stores, rather than the franchising common among most American retailers.
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Trend Analysis: Starbucks was experiencing a healthy and sustainable growth rate with an average of 25% growth in sale. Their stores increased from 165 stores in 1992 to 5886 stores in 2002. It showed a growth of 43% in the overall market of national and international boundaries. Their Starbucks net profit also shows a growth rate of an average of 49% which is very attractive for any industry. Their share price also increased from the day they started and revealed an average growth of 23%. Managerial estimates: Starbucks is expected to grow rapidly both locally and internationally. With the growth they have in their mind they will have to hire more labors for their new stores. Delphi technique: The company faced high criticisms for some of their policies. They were highly criticized for their market swarming expansion techniques. They expanded rapidly and wanted to be present in every corner of every city block in the world. The experts suggested that Starbucks would not be successful as coffee stores on both local and international markets as they dont follow the conventional stores of coffee shops. They were also criticized for their lose CSR initiatives. It was said that they use CSR as their brand polishing tool.
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Forecasting supply:
Techniques: Staffing tables: In 1989 Starbucks appointed Howard Behar who had more than 20 years experience in retail, as the director of store operations. In 1990 Orin Smith joined the company as Chief Financial officer. He had extensive experience in a number of organizations and consulting. He eventually became President and CEO of Starbucks. Howard Schultz continued to add key leaders in the company with a. view to expand successfully. Markov Analysis: The case mentioned some fact about the fatigue of employees because of rapid expansion though it didnt mention anything about the job change or rotation of employees. Skills inventories: Starbucks emphasized on providing superior service to customers. For that they provide training to employees to understand customer needs better. From 1990 Starbucks expanded it talent pool on the most influential senior levels. Managerial Inventories: Howard Schultz began assembling an experienced team of professionals to drive Starbucks growth. In 1989, Howard Behar, with more than 20 years in retail, joined the company as the director of store operations. In 1990, Orin Smith joined the company as Chief Financial Officer and quickly filled the role of the companys right-brain to Howard Behars left-brain. Smith had extensive experience in a number of organizations and consulting, and was a strong believer in process development. Replacement Charts: There is nothing in the case mentioned about the replacement charts or related anything related to it.
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Balancing Supply and Demand From the demand side analysis we found that the demand of labor force is expected to rise for Starbucks as they are expanding rapidly. As the unemployment rate was low in USA they dont have a sufficient supply of labor. So they would have to pay higher wages and salary to their employee.
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The third ingredient of national competitiveness is the presence or non presence of supplier industries or related industries that are internationally competitive. A country can have a competitive advantage since they can offer efficient, rapid and sometimes more cost-effective inputs or machinery when there are supporting industries in the country. Another benefit of home based suppliers is the access to information, new ideas and insight, and to supplier innovation. The presence of an internationally successful related industry in a country creates opportunities for information flow much like it does in the case with home based industries. The case has little information about the suppliers but nothing is there about the related industry. The suppliers are the farmers who are impoverished day by day as the coffee prices are decreasing day by day. Strategy, structure and rivalry: The last one of the main ingredient is the characteristics that shape domestic competition; The typical size of companies, the way they are managed, and the way they compete are factors that can help companies succeed or fail. The goals, strategies and ways of organizing firms in industries vary a lot among countries. According to Porter it takes a good match between these choices and the source of competitive advantage in a particular industry to gain a national advantage. Different industries suit different types of organization. Many aspects of a nation influence the ways in which companies are organized and managed, and these often grow out of the educational system, social and religious history and family structure. There are also huge differences among countries when it comes to the goals that the companies, their employees and managers seek to achieve. Countries will be attractive if the goals of owners and managers match the needs of the industry and if both employees and managers are motivated to develop their skills and make efforts to keep a competitive advantage.
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A country with tough competition and domestic rivalry can have a competitive advantage because this creates pressure on companies to improve and innovate; it also creates a fertile environment for creating and sustaining competitive advantage. Something that is difficult to reproduce through competition with foreign competitors. Porter also say that a nation have a competitive advantage if the domestic buyer are among the most sophisticated and demanding buyers for the product or service in the world. That kind of buyers works like a window into the most advanced buyer needs since they expect high standard in quality, feathers and service. We argue that USA is among the most sophisticated and demanding countries in the world and therefore USA is an attractive country for coffee shops considering establishment on this market. Porter say that a nation gain competitive advantage if they possess low-cost or high quality factors like human, physical and knowledge resources.
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ALTERNATIVES
As Starbucks wants to increase their sales with the satisfaction of their supplier, employees and improvement of their images to have their best success in market as the most successful chain coffee shop around the globe. Starbucks is expected to see the volume sales return to a positive performance in the forecast period, recovering consumer confidence, which will accompany the countrys improved economic outlook. Improvements in confidence will see resurgence in the purchase of non-essential indulgences such as coffee shop. As it is the mostly available chain coffee shop around the globe, with sweet growth rates. For that reason we can achieve the high profit margins. For the increasing sales we have chosen three alternatives to establish our demand. They are-
1. Do nothing 2. Differentiation Focus Strategy 3. Companies do practice corporate social responsibility (CSR) and alliances with the companies to reach the long term success and growth.
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Alternative 01:
Do nothing Starbucks can avoid doing anything regarding their sales or anything else. Due to very contradictory some options and problems Starbucks can take a decision for not doing anything to increase their sales or improve their image.
Advantage: 1. 2. 3. 4. 5. 6. It will save the investment It will save the managerial cost for the Starbucks. R&D costing will be saved. They dont need to invest more to satisfy their farmers. They dont need to invest more for paying up the employees and their work time. Investment on improving image will be saved which can be utilized in different sector.
Disadvantage: 1. Starbucks will lose the opportunity to maximize their profit margin. 2. Due to higher availability their costing of store is very high which cannot be minimized or covered up through the increased sales. 3. Their international market expansion could make their brand more known and it could increase their brand value. So it they dont increase their sales or satisfy customer values then it will be tough for them to maintain their quality. 4. Starbucks can lose their loyalty of customer due to less improvement in their sales. 5. They might lose their highly capable sales team who are specially trained with their resources due to underpaid or overworked which might have a long term effect on their future sales.
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Alternative 02:
and thereby consumer wallets, are growing again. This would bring the company slightly away from the differentiation focus strategy, but not so far as to move the company into a new strategic
marketing focuses. In conclusion, Starbucks is still in a growing stage, and with a few recommendations for marketing improvement, can continue the product leader position currently held in the specialty coffee industry well into the future.
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1. Use of word-of-mouth marketing can increase their sales under this strategy. 2. It would be very beneficial for Starbucks to maintain a close watch on industry and market competitors, specifically other coffee shop establishments and the restaurant industry entrants to the specialty coffee market. 3. Careful management of these linkages are powerful sources for competitive advantage because it allows the company to resolve trade-offs across organizational lines and processes, which are difficult to do for most companies
Disadvantages:
1. Both specialty coffee shop entrants can pose a challenge to Starbucks in an effort to provide the best quality, service, and experience for the customer, while the restaurant entrants to the industry are marketing their specialty coffee on a cost savings platform. With these industry competitors attacking the Starbucks market share from both angles. 2. The Starbucks Corporation does not aggressively market the company or their product. Instead, they are driving their sales through the companys image and reputation.
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Alternative 03:
Companies do practice corporate social responsibility (CSR) and alliances with the companies to reach the long term success and growth. CSR is entering a new era where suppliers from developing countries have significantly increased in importance. It is almost becoming an obligation and responsibly many companies. Nowadays, corporate social responsibility (CSR) is an important part of many business organizations. It is concerned with how a company tries to be beneficial to all its stakeholder groups. Many companies today run businesses with CSR especially big companies. They try to involve in activities that will keep both the business and social environment sound. The effects of CSR cannot be overemphasized; they range from companies running business well to environmental improvements. CSR can also go a long way to improve on product quality and service to customers. We wonder how companies run businesses with CSR in an adverse competitive business world. Today, competitors of some businesses already practicing CSR and beginning to embrace this new philosophy of business. Starbucks Company can be succeeded in a world of business with CSR. We will investigate why Starbuck Company engages in CSR and what definition this company gives to CSR. There has been so much news out there about Starbucks Company, many consumers and employees satisfied with their good sense of CSR. Moreover, it has many suppliers interested to operate with them. It also has many organizations that complement the Starbucks Companys efforts towards CSR. Today, Starbucks has published many Corporate Social Responsibility (CSR) annual reports that these are all available on the web site of Starbucks Company. In these reports Starbucks Company shows how it is actively involved in a combination of activities linked to the social, environmental and economic perspectives (triple bottom line thinking). In this study, we intend to investigate how the Starbucks Company conducts business and integrates CSR with their business. And also how the company have responsibility with the goals of enhancing the lives of its stakeholders- partners of the company, customers, coffee farmers, shareholders, community members, suppliers and others with whom the company works. Starbucks does not aggressively market the company through traditional means but instead focuses almost entirely on high-level marketing and branding of word-of-mouth and key alliances and partnerships. The utilization of alliances can be a cornerstone of the Starbucks Corporation marketing strategy. The strategic alliances of Starbucks can be one of the foundational reasons for the corporations long-term success and growth. Alliances are truly the driving factor being their name and brand recognition. Starbucks forms alliances with companies and social groups across the board, thereby broadening the exposure of the company, improving the organizations brand image and reputation, and exposing their name and product on a regular
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1. The effects of CSR cannot be overemphasized; they range from companies running business well to environmental improvements. 2. Responsibility with the goals of enhancing the lives of its stakeholders- partners of the company, customers, coffee farmers, shareholders, community members, suppliers and others with whom the company works 3. The strategic alliances of Starbucks can be one of the foundational reasons for the corporations long-term success and growth. Alliances are truly the driving factor being their name and brand recognition. 4. The utilization of alliances can be a cornerstone of the Starbucks Corporation marketing strategy.
Disadvantages:
1. It was accused of polishing its image more than truly working to improve the lives of those its existence depended upon: the coffee growers by the CSR. 2. If the alliance company cannot provide proper initiative strategically then Starbucks might not be capable to expand their business successfully to increase the sales.
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RECOMMENDATION: Why wont we choose Do nothing: First we reject do nothing, because it is not a wise decision to avoid a prospective market to expand the business as well as brand recognition. By making brand known to around the globe and make the profit out of it, is better decision for Starbucks. Starbucks will lose the opportunity to maximize their profit margin. Due to higher availability their costing of store is very high which cannot be minimized or covered up through the increased sales. Their international market expansion could make their brand more known and it could increase their brand value. So it they dont increase their sales or satisfy customer values then it will be tough for them to maintain their quality. Starbucks can lose their loyalty of customer due to less improvement in their sales even. They might lose their highly capable sales team who are specially trained with their resources due to underpaid or overworked which might have a long term effect on their future sales. For that reason it is not a better decision to do nothing regarding a prospective company structure.
Why we wont choose Differentiation focus strategy: Here we bypass the Differentiation focus strategy due to mismatch in their business mission and vision. As they want to make it highly available in all over around the globe but the strategy suggest making it targeting niche. As the Starbucks, is following very aggressive marketing to expand their business to make it highly available. But if they follow differentiation focus strategy then it might not be possible to make it as they want to. Both specialty coffee shop entrants can pose a challenge to Starbucks in an effort to provide the best quality, service, and experience for the customer, while the restaurant entrants to the industry are marketing their specialty coffee on a cost savings platform. With these industry competitors attacking the Starbucks market share from both angles. The Starbucks Corporation does not aggressively market the company or their product. Instead, they are driving their sales through the companys image and reputation.
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Why we are choosing Companies do practice corporate social responsibility (CSR) and alliances with the companies to reach the long term success and growth.
Many people are awed by the speed of the growth of Starbucks. The success of the coffee company in influencing the peoples preference in buying coffee is something that could grab the attention of everybody, most especially investors. Starbucks has established a unique image of itself. Thus, it is clear that what the company is selling is not merely its coffee, but its brand image as well. Starbucks has run its business by driving Corporate Social Responsibility (CSR) as a tool that covers the company in every sector of their business. Lets take the environment, for example. Starbucks is really concerned about affecting the environment. By utilizing innovative technologies to improve the effectiveness in its processes, they reduce costs and at the same time they are preserving the environment. In terms of social strategies, Starbucks has splendid strategies to cooperate with its partners and stakeholders. Starbucks has created a lot of activities to encourage communities and to create long term relationships with them, which reflects on their brand. In terms of economics, Starbucks is not only thinking about its benefits but also for all parties related with their business, by following the laws of each country. Starbucks has managed to create fair trade with its suppliers, customers, and even for their competitors. It has made Starbucks very successful in its economic situation. Moreover, CSR can build competitive advantage over competitors that Starbucks gain more competitive advantage by engaging in CSR into every part the company. Specially, the company focuses on their suppliers (coffee farmers) and partners (employees) which they have run business as sustainable together. We think that the company has come to correct the way to run business by fully practicing CSR and keeping their market position. From what we investigated, a companys CSR practice relates to numerous different behavioral aspects within a company. Many organizations argue that companies engaged in CSR can obtain increased sales and market share, reduce costs and increased interest from investors, improved employees motivation, improved brand awareness and image of the company. However, we think that the companys CSR investments will affect the companys performance positively as customers value CSR activities. It is the reason why the company has succeeded in business world by CSR.
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IMPLEMENTATION
Implementation: Having determined the causes of Starbucks current downfall, it is necessary to formulate a plan to address these issues. Strategic change cannot be achieved without specifying which actions are to be undertaken. Since the major issues were already identified, strategies for the remedy of these issues need to be formulated. Proctor states, Strategy is a plan that integrates an organizations major goals, policies, decisions and sequences of actions into a cohesive whole. Thus, based on the above evaluations, the following recommendations are put forward. To increase the sales it is required for Starbucks is to expand their business overseas. The most attractive industry for any profit maximizing firm within a capitalistic society would be one in which they can have a pure monopoly. In economics this refers to situations in which one established firm can be the sole provider of a product or service in a particular market segment. Among the different alternatives; we have chosen to Companies do practice corporate social responsibility (CSR) and alliances with the companies to reach the long term success and growth.
General Implementation: Implementing the CSR and alliances in the Starbucks: In the todays business world, there are many strategies being used to run businesses. In the recent past, the topic of Corporate Social Responsibility (CSR) has grown rapidly. People are starting to demand that companies take their social responsibility seriously. Many companies have started to engage in CSR as a strategy in order to gain benefits that can give them an added advantage over their competitors. There have been increasing numbers of companies engaged in CSR to run their businesses. Nowadays corporate social responsibility (CSR) can drive companies to succeed in business by increasing sales volume and brand awareness. We decided to choose Starbucks Company because this company has a good reputation in terms of social responsibility. Thus, we would like to investigate how Starbuck successes in the business world are linked to CSR strategy. We would like to know how the company integrates CSR and what factors have affected the companys success over the years with special reference to CSR.
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No doubt in previous business, economics has influenced our world. Every company in all sectors has focused on the benefits or profits. Some organizations want to serve only shareholders or financial reports. But nowadays it is difficult to do this if companies think about merely their own benefits by ignoring social, environment and other stakeholders. Because it is short term strategies and the firms will face several impacts of organizations. In order to sustain economic businesses, companies should not only concern about benefits of financial forms but also ethnic firms have to care to people or society and environment as well. From Eco-efficiency, companies have involved in competitive businesses by offering good prices, products and services to improve the quality of life in order to make customer satisfaction. In which these processes try to reduce environmental impacts. Natural resource productions relate to maintaining environment and competitiveness which limited environment has created innovation of products as an eco-efficiency. To develop economic sustainability, all companies have to rely on ethnic businesses that they cannot run businesses without responsible stakeholders such as their staffs, customers or societies who affect directly to companies such as losing image, profits of companies and so on. On other words, the ethics company will receive a lot of economic benefits of organizations by using innovations to operate their businesses which can increase the companies benefits. For instance, reducing the cost of productions, creating good qualities of products and good image of media including building long run relationship with stakeholders too. It might say these are win-win strategies. Environment: All mankind is involved with the environment. Everybody has used a lot of natural resources in the whole life. Unfortunately, nowadays our environment is destroyed by people or corporations that might not care about it of which there are many impacts on our planet such as
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Formulate Strategic Marketing: Strategic marketing is an important factor in any business. As discovered above, the companys failure to draw a marketing plan created a gap in its value chain, which has caused a significant deterioration in the companys brand image/reputation. The company needs to have a direction in the marketing arena to further improve its image and brand recognition. Marketing is concerned not only about promotional advertisement activities. Marketing planning is a process by which organizationsattempt to understand the market conditions and the needs and preferences of the customers whilst taking into consideration other organizations who are also competing in the market. It involves satisfying the customers wants and needs and managing relationships with stakeholders. Drucker also emphasized that a business has only two functions, one of which is marketing and the other is innovation. The aim of marketing is to create new customers and to communicate with all of its stakeholders (customers, shareholders and employees). A company cannot effectively implement any activity if no communication with all its stakeholders was made. This is the role of marketing. In the case of Starbucks, it has made little regards to marketing, as evidenced by its small portion of budget array allotment for the said value-creating activity. It appears that the company relies on its strong operational capabilities more in such a way that marketing has been put into the sideline. Although this may have worked before, the changing market conditions warrant that the company should start focusing as well in strategic marketing. Competitive advantage can be gained and sustained with the help of marketing. Proctor argued that competitive advantage should be market-led. Marketing is basically the distinguishing, unique function of a business. Thus, Starbucks must focus a substantial amount of resources into improving its marketing activities. To gain competitive advantage, an organization must first define its strategy. One of the authorities in the creation of strategy to achieve competitive advantage is Michael Porter. The author defined strategy as, the creation of a unique and valuable position, involving a different set of activities. Marketing strategy, therefore, is the formulation of a different set of activities that aims to create a unique and valuable position in the market. The strategy includes the creation of a plan to identify market conditions and to identify which segment of the market the company will focus on. Strategic objectives must also be set that will serve as a guide in the implementation of the marketing strategy. It has been identified above that Starbucks employs a generic strategy of focus with an emphasis on differentiation. This strategy, however, may now need to be revisited and adjusted. Starbucks needs to communicate with its customers now. Starbucks also needs to create new customers and new markets to prevent the saturation of its current market segment.
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Improve Stock Market Standing: To improve its stock market trading, Starbucks has to show that the company is a profitable business. This can only be done if the company will continue to show that it has a sustainable command of its brand/image reputation and recognition. The company has to significantly stop the current downtrend in sales and profit. But in order to do this, the company must initiate and implement changes within the organization, as recommended above. Stock market analysts are closely monitoring the Starbucks shares performance and profitability. Hence, the company must enhance its reputation by showing significant and substantial improvement in its marketing and operational activities to show that the company is in command of its future and that it can maintain its current leadership in the specialty coffee industry. A part from that, the company can also show that it has the capability to venture into new markets. This way, analysts will not hesitate in giving a high rating to the company, and investors will not be reluctant at putting their money into the Starbucks stocks.
Strategic Leadership Improvement: Above all the changes that Starbucks needs, its leadership must be changed. Not that the managers will be removed but their capabilities, skills and attitudes must be improved. No organizational transformation will be complete if the leaders are not receptive of change. Organizational change can be done only if the correct processes are implemented and the leaders have been at the forefront of these activities. Leading organizational/strategic change is not an easy task for managers or leaders of a company. There have been efforts that failed because of oversight by the leaders. Whilst Starbucks leaders seem to have not failed, it is necessary that its leaders should know exactly what to avoid in executing changes in the organization. Increase International Expansion: The first and most pressing action which Starbucks should take is to reduce their US expansion efforts. Continued aggressive attempts at expanding in the United States by adding as many new store locations as in the past will inevitably act to cannibalize existing locations same store sales. The fundamental reason why this is true and why Starbucks should reduce their U.S. expansion plan is the conclusion reached earlier in this analysis: that the specialty coffee industry in the United States has entered the mature stage. One of the qualities inherent to the mature stage of the industry lifecycle is overcapacity. Any significant expansion efforts in an environment where overcapacity is present will be met with failure. By reducing their expansion efforts in
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Instead of selling discounted coffee under their segmentation strategy, which seems aimed at appealing to the price sensitive lower end of the market which is likely destined for McDonalds and Dunkin Donuts, Starbucks should concentrate on creating more elaborate discounting techniques to employ with their most frequent customers. This both eliminates the potential degradation of the Starbucks brand and increases the bond customers will experience with Starbucks. Additionally, a rewards program will encourage customers to visit Starbucks more often and will dissuade them from visiting competitor stores, such as McDonald's and Dunkin' Donuts, which seem unlikely to offer reward programs.
Rent out Meeting Space and Install Free Wireless Internet: Next, Starbucks should create a more business and technology friendly atmosphere in its stores. With the advent of the Internet and the ever increasing array of electronic products capable of accessing it, there has been an increasing shift in consumer's work locations from office buildings to home offices. With this shift and natural human psychological needs, Starbucks is allotted an opportunity to cater to these consumers working out of the home by providing meeting space for rent. These meeting spaces should be accompanied with the addition of free wireless Internet access throughout every Starbucks store and printers accessible to the customers, which are color capable and reasonably priced. The meeting space should be offered at a per hour rate while the printers should charge per copy. The availability of meeting space and printers, coupled with free wireless Internet access would
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Continually Improve the Coffee: Given the specialty coffee markets transition into the mature stage of the industry lifecycle, it is important to maintain a reputation for the highest quality coffee in the industry. In February of 2008 the magazine Consumer Reports rated McDonald's drip coffee as tasting better than that of Starbucks. To ensure the quality of their coffee, Starbucks should continually analyze their brewing systems and practices and consider renovations. The brewing process should at all times be judged based upon its ability to bring out the complexities and distinctive flavors of the worlds different exotic specialty coffees. Starbucks should also be intent upon protecting whatever brewing process they deem to be the best through patents or acquisition of patents, which would, in turn, provide a defendable competitive advantage.
Becoming More Environmentally Friendly: Although many efforts are being made at Starbucks to enhance their image as being environmentally friendly, as is true for all modern corporations, they still have much room to improve, thus, further differentiating themselves. There is a growing positive public sentiment toward companies that make every effort at being environmentally friendly. This is particularly true among the demographic consumer base Starbucks targets. For the first 10 years of Starbucks existence, they would ask their customers whether they wanted their coffee to go or not. If the customer chose to drink the coffee in the store, they were given a porcelain cup as opposed to a disposable paper cup. The resurrection of this practice would be a simple way to appear more environmentally friendly. Moreover, if marketed and operated correctly, such a program could well save Starbucks money. To encourage customers to use porcelain cups, Starbucks could offer in-house drinkers who choose to use the porcelain cups a discount.
Other examples of ways in which Starbucks could enhance both its actual green bona fides and its image as an environmentally friendly company would include: selling to go mugs and reusable sleeves at affordable prices; implementing recycling bins; seeking to compost or otherwise recycle food waste; and encouraging customers, using financial incentives, to recharge plastic Starbucks cards as opposed to purchasing a new one. All of these steps would enhance Starbucks image of corporate responsibility and would help to further differentiate Starbucks
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Wage and Hour Rules: Starbucks has paid the salary and compensation for partners (employees) based on hours laws and regulations that mean Starbucks offers the benefits fairly. Workplace Environment: All partners (employees) have been treated with esteem and honor without insulting, bias, unfairness, irritation and so on. On the other hand, they are working in the company under friendly working environment.
Workplace Health, Safety and Security: Officers and partners (employees) have cooperated to each other for following the safety regulations, practices and training in order to prevent themselves from accidents or injuries.
Starbucks quality and Customer Protection: Starbucks focuses on quality of products because customers health and safety are significant for business. Company ensure ever process that is clean and hygienic including good service and facility in the shops.
Compliance with laws and regulations: Starbucks Company has followed the laws, rules or regulations of every country where organization run businesses. In order to ensure, the company operates ethnic business and follows officially permitted standards.
Fair competition: Starbucks relies on fair competition laws and supports in free market. However, Starbucks has to have agreement with competitors or suppliers under regulations such as not talking
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Human Resources Management at Starbucks: Starbucks realized early on that motivated and success of a retail business. Therefore the company took great care in selecting the right kind of people and made an effort to retain them. Consequently, the companys human resource policies reflected its commitment to its employees. Starbucks relied on its baristas and other frontline staff to a great extent in creating the Starbucks experience which differentiated it from competitors. Therefore the company paid considerable attention to the kind of people it recruited. Starbucks recruitment motto was To have the right people hiring the right people. Starbucks hired people for qualities like adaptability, dependability and the ability to work in a team. The company often stated the qualities that it looked for in employees upfront in its job postings, which allowed prospective employees to self-select themselves to a certain extent. Having selected the right kind of people, Starbucks invested in training them in the skills they would require to perform their jobs efficiently. Starbucks was one of the few retail companies to invest considerably in employee training and provide comprehensive training to all classes of employees, including part-timers.
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Integral Implementation: Strategic change is the call of the day for Starbucks. Perhaps, this is the time that the company will need to revisit its existing business models, practices and strategies to know whether these models still conform to the conditions of the market. The company has been in the business for two decades, and undoubtedly has been the industry leader for almost the same length of time. However, since market conditions change as evidenced by the current events and continuing globalization of markets, the company may need to reform its strategy. Starbucks may have already saturated its current market or its strategy may have been going into a different direct ion, one that is going away from the objective market situation. As such, the company has to implement a strategic change. Its management practices may need to be revised. It is the customer that determines what a business is. In this sense, Starbucks should identify what the customer wants, what they need and what they prefer, not the other way around. In the course of its practice in the previous years, Starbucks seems to be content in expansion alone, not communicating with the customers to know what their preferences have been. It must be emphasized that customers needs and preferences are always changing. Hence market conditions also change. In this context, Starbucks failed to keep up with the changing customer behavior and market conditions. Thus, in the last several months, Starbucks performance is going on a downtrend. It is imperative that the causes of this downtrend must be identified and remedies must be put in place. The remedies, however, need to be long-term, not only short-term. Whilst short-term actions are needed to address tactical changes, it is more important to set a strategic goal, or if necessary, revise the current strategic goal to conform to the realities in todays business environment and the future of the business. Thus, it was recommended that Starbucks should focus on marketing, while enhancing its operational effectiveness. Marketing has been the missing component in the Starbucks practice in recent years. It is therefore significant to put emphasis on this area. Apart from that, the companys leadership must be transformed as well. It has been recommended that the organizations leadership should adopt some behavior, traits or skills that are necessary to implement successful changes in the organization. Several practices and principles have been described in this paper to serve as a guide or reference in the leadership practices of Starbucks executives and managers. These principles have been set as a product of studies of academicians and practitioners in the field of management, marketing and other areas of business. It is highly recommended that Starbucks should implement these changes within the organization in order to maintain its current standing in the industry and achieve strategic competitiveness.
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