Professional Documents
Culture Documents
Initially Started
In 1971, three academics, English Teacher Jerry Baldwin, History Teacher Zel Siegel and
writer Gordon Bowker opened Starbucks Coffee, Tea and Spice in Touristy Pikes Place
Market in Seattle.
The three were inspired by entrepreneur Alfred Peet to sell high-quality coffee beans and
equipment. The store did not offer fresh brewed coffee by the cup, but tasting samples
were sometimes available.
The store was an immediate success, with sales exceeding expectations, partly because
of interest stirred by the favorable article in Seattle Times.
By the year 1980s the company had four Starbucks Stores in Seattle area and had been
profitable every year.
Then..
Then
Now
The vision statement definitely describes the trance or the future of the
company that is to be the global most renowned coffeehouse and also to be
the most esteemed and completely sorted brand by the people around the
world.
The company also focuses its vision to employee satisfactions, so that the
employees will be delighted to perform their duty in Starbucks outlet
1.
1. Provide a great work environment and treat each other with respect and dignity.
2.
3.
Apply the highest standards of excellence to the purchasing, roasting and fresh delivery
of our coffee.
4.
5.
6.
QUESTION A
What are the firm most important
external opportunities and threats ?
Main Opportunities
1.
2.
3.
4.
Globalization
and
internationalization
enforcement makes populous companies are easy
to enter international market
6.
7.
8.
2.
3.
4.
5.
6.
7.
EFE MATRIX
Key External Factors
Weight
Rating
Weighted Score
0.10
0.3
0.05
0.2
0.05
0.1
0.05
0.15
0.10
0.4
0.10
0.4
0.10
0.3
0.05
0.1
0.05
1`
0.05
2. Supply disruptions
0.05
0.15
0.05
0.1
0.05
0.20
0.05
0.1
0.05
0.15
0.10
0.30
OPPORTUNITIES
THREATS
1.00
3.00
QUESTION B
-Forces Model,
discuss the attractiveness of the industry
in which the company competes.
Competitive Rivalry
Potentials Threats of
Substitutes Product
Bargaining Power of
Suppliers
Threats of New
Entrants/Competitors
Starbucks
Competitors
There is a great deal of risk of entry by
potential competitors due to the low start
up costs. Such as Old Town, Caribou Coffee
McDonalds is able to add specialty
coffee to their existing services to
tap into the specialty coffee market
HIGH DEGREE
of Threats of New Competitors in
term of coffee shops line or
beverages/foods outlet
Threats of Substitutes
Product
Coffee & Food
Provision
In the past, buyers did not really have bargaining power when it
came to premium coffee such as Starbucks. The sheer scale of
Starbucks business reduces the bargaining power of any single
group of buyers.
During some years ago, even though the price goes up, the buyers
who like only Starbucks would still come.
There is very low bargaining power for coffee bean suppliers due to the
importance of Starbucks business to any individual supplier, and the fact
that Starbucks accounts for a large percentage of any individual suppliers
sales. Indeed, Starbucks also got some exclusive coffee providers.
This gives Starbucks the ability to dictate the price of coffee bean sales.
Starbucks got different suppliers; actually 70% of them come from fair
trade and 30% from normal trade. Moreover, Starbucks got its own
distribution network, which impede any competitors to get the same final
products and put opacity on the different production costs.
Starbucks is a global coffee chain and we can imagine that many suppliers
are eager to work with them.
Any other coffee chain. Examples include The Coffee Bean & Tea Leaf,
Gloria (US) / Caf Negro (EU)
QUESTION C.
3 Major
Competitors of Starbucks
Major
Competitors
Dunkin'
Donuts
McDonalds
Caribou
Coffee
27
Capital Investments
Launched McCafe by
McDonald
Adding new item in
breakfast menu
Nontraditional media
Store Locator
Starbucks
Dunkin Donuts
McDonalds McCaf
Caribou Coffee
29
prominent competitor of
Starbucks
Smoothies.
Lots of Donuts.
33
Leveraging
through
Online
marketing
and
rewards
for
customers,
often
leveraging
through celebrity or athletes
endorsers such as the Boston Red
Sox and the other New England
icons.
34
Starbucks VS Mc Donald
McDonalds has offered breakfast for years, and over the last couple years has
been heavily marketing its McCaf as their main attractive products of roasted
coffee for their customers.
Lines of coffee drinks all while continually rolling out new drinks of both the
coffee and non-coffee variety, such as smoothies and frappes, McDonalds version
of the Starbucks frappuccinos.
Starbucks created their frappuccino for the summer season while McDonalds
introduced their frozen strawberry lemonade, a non-coffee beverage under
McCaf.
37
McDonalds Strategy
To email their friends about how they feel about high priced
coffee
38
QUESTION D.
Strengths and
weaknesses
-Brand equity
-Strong Brand Image
-Great Work Environment
-Rapid Expansion
-Excellence Services
Customer satisfaction is
top priority
Strengths of Starbucks
Leading retailer and roaster for brand specialty coffee in the world.
Starbucks' profit margins were hit hard by the Great Recession, but the
company recovered quickly, posting a 12.7% increase in year 2012.
Rapid Expansion
Starbucks brand name is famous for its intense customer loyalty. In terms to satisfy
the customer Starbucks plans to open 1,200 net new stores in fiscal year 2013, many
in the United States and China and also worldwide. Huge market expansion to
emerging economic country such as China, Brazil, India and Russia
The company's aggressive make the Starbucks store conquer in every large city in the
world.
"Starbucks on every corner" strategy has allowed Starbucks to dominate local
markets. Starbucks is the world's largest coffee chain, with approximately 20,000
stores in 60 countries, 12,937 of which are located in the United States.
Strengths of Starbucks
Expensive
Vulnerability of Innovation & Development
Weaknesses of Starbucks
so much so that the company is considering scaling back its European presence.
Different regional tastes have also been a concern - most notably in France,
where Starbucks Expresso is considered "too charred" for French palates. Even if
European traffic picks up, customers could switch to lower priced menu options.
Starbucks may face (self-cannibalization) because of Higher real estate and
labour costs in Europe are also compressing margins.
Starbucks has a reputation for new product development and creativity. However,
they remain vulnerable to the possibility that their innovation may falter over time.
Although Starbucks provides excellent customer service due to their loyal and
dedicated employees, they do this at a cost. They pay their employees
more
than restaurants and retailers. Furthermore, they offer benefits to
full-time and
part-time employees. This results in high costs for the
company.
IFE MATRIX
Key External Factors
Weight
Rating
Weighted Score
0.10
0.3
0.10
0.4
0.05
0.2
0.10
0.3
0.10
0.4
0.10
0.4
7. Brand and well known for its eco friendly, stringent and healthy products
0.05
0.2
0.10
1`
0.1
0.10
0.2
0.05
0.1
0.05
0.1
0.10
0.2
STRENGTHS
WEAKNESSES
1.00
2.90
QUESTION E.
financial condition?
Gross Margin
It measures how much higher they are able to price products above the costs to produce
those products
Return on Assets
It shows what percentage of every dollar invested in the business was returned as profit.
Current Ratio
The current ratio measures current assets against current liabilities to see if the company has
enough assets that can be converted into cash within a year to pay its debts that are due over
the next year
Quick Ratio
The quick ratio is the same as the current ratio only with inventories removed from
current assets
Debt Ratio
It measures the amount of the company's assets that are provided through debt rather than
equity
Time Interest Earned
Times interest earned shows how easily the company will be able to pay its
interest charges for the year
Asset Turnover
Asset turnover measures the efficiency of all assets of the company
Inventory Turnover
Inventory turnover measures how many times inventory is sold or used in a year. It
reveals how efficiently a company uses its inventory.
All of these things indicate that Starbucks has experienced better compounded annual
growth rates than Dunkin' Donuts. However, Dunkin' Donuts did experience an increase
in both sales and profits, although their increase in costs was much higher in
comparison.
QUESTION F.
What
Provide a great work environment and treat each other with respect and
dignity.
Starbucks will always appreciate the employee as the revenue which is increasing
every year is by the efficient and hardworking employees.
Use the pays, benefits and opportunities for personal development to help gain
employee loyalty and become difficult to imitate.
Paying scale and fringe benefit package allowed it to attract motivated people with
above average skills and good work habits and also to make the employee to be loyal
with Starbucks.
2.
Store / Retail Outlet Strategy: Provide a relaxing social atmosphere and third home experience
3.
Manufacturing Strategy: Choose the only premium coffee bean with their loyal suppliers by using
Backward Integration Strategy
4.
5.
6.
Information System & Operation Strategy: Use the Integrated Enterprise Resource Planning
7.
Marketing Communication Strategy: Through social media, community brand, TV-Ads, PR & Advertising
8.
9.
Ethical and CSR Strategy: Strengthening their ethical sources, environmental and community involvement
10.
International Business Strategy: expand global retail business to increase market share in a manner
Becoming innovative
diversification
and
creative
with
their
products
Creating unique and relaxing experience and atmosphere for people has
been very important for the company as they have realized that this is one of
the strongest concepts attached to the company.
The coffee giant achieved these using creature comforts, such as comfortable
furniture and relaxing music.
3. Manufacture Strategy
4. Pricing Strategy
5. Service Strategy
Advance
System
Business
Enterprise
Information
7. Marketing
Communication Strategy
8. HR Corporate Strategy
QUESTION G.
What objectives and strategies do you recommend
for this firm? Explain your reasoning. How does
what you recommend compare to what the firm
plans?
2. to focus on relevant
information and profitable
growth opportunities
through the offering a new
product and platform
3. to achieve a sustainable
growth in established
international market. While
at the same time investing
in emerging market.
6. to be customer centric
based company who utilize
the marketing and IT
channels as a media to be
closed and interactive with
the customers.
2. Strategy to
Enhance
Operation
Management of
Starbucks
1. Strategy to
maintain product
innovation and
development
3. Strategy to
renew the
Starbucks
Brand name
4. Strategy to
build and retain
customer
loyalty
5. Strategy
towards cost
efficiency
6. Strategy
towards further
sustainable
growth
1. Why must be
Strategies to maintain product innovation and development ?
It is because some major reasons as follows:
Attracting more customers to come and enjoy foods/drinks in
Starbucks
Increasing the sales and market share of Starbucks
Survival & offensive mode to the rapid development of
entrants/competitors who also work in the same industry
Making customers to have diverse selections and experiences of food
tastes and appeals in Starbucks
Making it as the sustainable competitive advantage of Starbucks
2. Why must be
Strategies to Enhance Operation Management of Starbucks ?
It is because some major reasons as follows:
improving its store operations management, layout and inventory
Increasing operational effectiveness in global-localized context
improving its customer service through operational development
Increasing their sales through efficiency management
Increase Starbucks productivity and capacity
strengthening the global supply chain management in emerging
markets
Maintaining their total quality management & quality control
3. Why must be
Strategies to renew the Starbucks Brand name?
It is because some major reasons as follows:
Starbucks is no longer the sole dominant player.
to convince people that Starbucks coffee is superior to other coffees
and beverages. This is vital because if the general perception is that
McDonalds coffee is comparable to Starbucks coffee
These competing firms are a threat to Starbucks as they strive to
provide premium coffee comparable to Starbucks but at a lower
price. (McCafe)
Renewal of SB Brand name will play a huge part in making
Starbucks Coffee Company a success.
4. Why must be
Strategies to build and retain customer loyalty ?
It is because some major reasons as follows:
to make sure that customer satisfied with their services
to ensure to get customer feedback to improve marketing
strategies
to build a good relationship to customer will lead to customer
loyalty that can give a good benefit towards the company.
to attract new customers from other segments and target market
to inform easily customer in order to Introduce new product
to increase the sales of Starbucks Products
5. Why must be
Strategies towards cost efficiency ?
It is because some major reasons as follows:
Currently Starbucks has high operational cost regarding their
human capital cost, resources cost and expansionary cost
Cost efficiency will let them to increase the sales and productivity.
To face competition from nationwide coffee manufactures.
High debt leveraging in their corporate finance fundraising method
as mentioned by NASDAQ (2012)
Cost efficiency will stimulate Starbucks to rethink about their
holistic management.
6. Why must be
Strategies towards further sustainable growth?
It is because some major reasons as follows:
As a premium product, Starbucks meets forgery and imitation
troubles. The brand is actually counterfeiting in some countries.
Starbucks should worry more and more about those facts
The issue of organizational and corporate governance constraints as
Starbuck is known as the multinational company (MNC) which has
more than 19,000 branches all over the worlds
The reason of ethical, safe, stringent, hygienic, organic and
environmental concern for several products
The shift of consumption and purchasing behavior of society.
PROBLEMS
High Cost Incurred for
Research and Development
Perceived Value from
Customer can be tarnished
New Products May Fall and do
not comply with the
customers expectation.
SOLUTION
Starbucks needs to ensure
that the coffee offered is of
the highest quality.
Starbucks has to make sure
that they will differentiate
their products in line with
cost efficiency objective
fulfillment
Starbucks can use the
substitutable ingredients in
order to develop and create
the development and
differentiation of products
86
PROBLEMS
Incurring a cost to improve
operation management of the
Starbucks
The operational management
model is subjective and can
be based on Resources Based
View/ Industrial Based View
Decrease in a number of
seating if they want to
improve the equipment and
store stuffs to improve the
store atmosphere
SOLUTION
By using the appropriate
budgeting techniques in order
to select based on the
importance and rating of
improvement objectives
The improvement of operation
management enhancement
can be done in sequential or
progressive basis in order to
save up the budgets
Architectural and Interior
Designing must be considered
very well before coming to
the decision making to the
store design
improvement. `
87
PROBLEMS
The perception of publics
about aggressive marketing
advertisement could be
negative
The publics may assume that
Starbucks is trying to compete
with other potential
companies by having
aggressive efforts temptation
of marketing communication
in some extent
SOLUTION
Make sure that Starbucks is
still on the track based on its
vision and mission as well as
its objectives
Ensure that Starbucks when
they are doing the marketing
efforts. They are still in side
and in line with their current
and newly attracted
customers in order to retain
their confidence & loyalty.
Make sure the Starbucks brand
renewal does not seem to
make customers become
confused
with their tactics.
88
PROBLEMS
Costly marketing cost
Marketing Project
Sustainability is questionable
Increased cost to train
baristas
Improving layout store takes
time and incur cost.
SOLUTION
Try to be selective and
effective in utilizing and
managing the marketing
channels
The Balance Community
Scorecard must be created to
engage the community with
Starbucks
Public Relation must be very
creative and continuous to
update & interact with
customers
Store Improvement can be
done in green way in order to
have cutting
cost
89
PROBLEMS
Risk that local markets react
negatively to Starbucks
(Example: the Halal dilemma)
Focus on the coffee will led
the company to face the
inconsistency in term of their
diversification project
SOLUTION
Get the response and
feedback from the society
Look at the industry project
benefits (CVB instrument-Cost
Volume Benefit Analysis about
how to juggle with
diversification projects and
coffee focus.
More efficient to create stores
(by using recycleable and eco
friendly materials)
90
PROBLEMS
It is already known
that some of
starbucks products
are containing the
synthetic & artificial
ingredient.
Geo culture
constraints
Forgery is usual
Corporate Culture and
governance take time
to be improved and
restructured
SOLUTION
make sure that Starbucks has
the legal and ethical team
who study intensively about
the forgery and counterfeiting
about their intellectual
property
Ensure that the R&D
department is working so hard
in order to prevent the issue
of artificial ingredients and
also try to proof with
reasonable evidence
Sequential improvement in
term of corporate governance
management
91
CONCLUSION
CONCLUSION
Starbucks success is achieved through a few factors which are internally and externally
improved.
These factors not only have increased the sales but also the reputation among the coffee
and beverages/food lovers.
Starbucks encounters aggressive competition in all areas of its business activity. The
market for each of their business segments are characterized by vigorous competition
among major corporations with long established positions and a large number of new and
rapidly growing firms.
Starbucks have a good financial capacity with good strategies; it can overcome all the
competitors to shine high as the first class coffee purveyor
References
David, Fred R. (2013), Strategic Management: Concepts and Cases, 14th Edition, New
Jersey: Prentice-Hall International
Gallaugher, J., & Ransbotham, S. (2010). Social Media and Customer Dialog
Management at Starbucks. MIS Quarterly Executive, 9(4).
Smith, M. D. (1996). The empire filters back: consumption, production, and the politics
of Starbucks Coffee. Urban Geography, 17(6), 502-525.
Starbucks Corporation - Financial and Strategic Analysis Review. (2012, Dec 28).
Retrieved from GlobalData.
Starbucks
Marketing
Strategy.
(n.d.).
Retrieved
from
http://www.voteforus.com/starbucksmarketingstrategy.html
Thompson, Craig J., and Zeynep Arsel. (2004): "The Starbucks brandscape and
consumers(anticorporate) experiences of glocalization." Journal of Consumer Research
31.3 631-642.
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