Starbucks Strategic Analysis & Recmmendations

Starbucks

• Presented By Nimra Nasar

70’s• 1971-

Starbucks opens first store in Seattle’s Pike Place Market.`

80’s• 1982-Howard Schultz joins

Starbucks as director of retail operations and marketing. Starbucks begins providing coffee to fine restaurants and espresso bars

• 1983-Developed coffeehouse in Seattle based on Cafes in Italy.

• 1984- First Starbucks café late served

• 1987- expanded to 17 stores

90’s• 1995- Beginning of the

Frappes- total stores 677• 1997- Starbucks

Foundation starts• 1998- Tazo tea company

is aquired• 1999- China, Kuwait,

Lebanon and South Korea

History

2000’s2000- Howard Schultz transitions to chairman and chief global strategist2001- Introduces the Starbucks Card, an innovative stored‐value card for customers to use and reload. 2002- Starts selling Fairtrade certified coffee in the countries where Starbucks does business.2002- Establishes Starbucks Coffee Trading Company (SCTC)

2000’s cont.2003- Seattle’s Best Coffee and Torrefazione Italia coffee brands are aquired2004- 8,569 Stores2005- Orin Smith retires as Starbucks president and chief executive officer. Jim Donald promoted to president and chief executive officer2008- Eliminates all artificial trans fat and makes 2 percent milk the new standard for espresso beverages in all U.S. stores

Present Day2010- Expands digital offerings for customers with free unlimited Wi Fi, ‐Starbucks Digital Network in U.S. stores16,858 Stores2012- Becomes the world’s largest buyer of Fair Trade coffee

Mission Statement1990 – October 2008

• Establish Starbucks as the premier purveyor of the

finest coffee in the world while maintaining our

uncompromising principles as we grow.

EthicsStarbucks™ Shared Planet™ is committed to doing business

responsibly. A better way to help each other and the planet.

Competition

McDonalds Dunkin Donuts

Second Cup New World Coffee

Caribou Coffee

SWOT ANALYSIS

STRENGTHS Brand Name

Recognition Quality Products Well Developed

Corporate Strategy Location Distribution Manufacturing

competencies

WEAKNESSES Narrow Product Line Complicated Products

OPPORTUNITIES Expand into foreign

markets Widen product range Diversify into new

growth businesses Apply brand name

capital in new areas

THREATS Change in consumer

tastes Regulations Increase in domestic

competition Changes in

economic factors Downturn in

economy

INTERNAL ANALYSISInternal Strategic Forces Weights Rating Weighted Score Comments

S1- Brand Identity 20% 4 0.8 S1. The company consistently maintains its brand, even without heavy marketing.

S2- Quality 10% 3 0.3 S2. They search for quality beans worldwide.S3- Variety 10% 3 0.3 S3. They offer drink variety and customizationS4. Locations 10% 5 0.5 S4. Location are everywhere as one of the

company’s main goals

S5- Convenience 20% 4 0.8 S5. The new products drive through windows , instore locations convenience is important

S6- Store ambiance 5% 3 0.15 S6. Ambiance was a foundation of the Starbucks’ brand and continuous in its locations.

S7- Ethics 5% 3 0.15 S7. By using fair trade ingredients they are leader in ethics.

Internal Strategic Forces Weights Rating Weighted Score Comments

W1- Overexposure 10% 4 0.025 W1. Starbucks’ goal to have 30,000 locations stalled in the recent recession. By becoming over exposed their risk losing the unique quality they were founded on.

W2- Too many Products 5% 4 0.125 W2. By constantly adding products, some products have lost value, Seattles’ Best for example, and they are risky endeavors.

W3- Risky investment in more locations

5% 4 0.125 W3. Expanding locations in the US, is a high risk and costly investment in comparison to international expansions.

TOTAL SCORE 1.00 3.05

EXTERNAL ANALYSISOPPORTUNITEIS

Internal Strategic Forces

Weights Rating Weighted Score Comments

O1- Customization 10% 4 0.4 O1. Starbucks’ introduce a completely custom Frappacinou in Canada.

O2- Intl Market 15% 5 0.75 O2. Increasing efforts internationally, to increase stability

O3- ON the GO Lifestyle 20% 5 1 O3. Via Instant coffee and other products to be in groceries and convenience stores

O4. Partnerships 10% 3 0.3 O4. Partnering with more locations including Pepsi

THREATS

Internal Strategic Forces Weights Rating Weighted Score Comments

T1- Direct Competition 15% 3 0.45 T1. Direct competition from Peets and Coffee Beans increasing. Lack of Marketing.

T2- Cheaper Alternatives

15% 2 0.3 T2. Cheaper alternatives from McDonalds and Dunkin Donuts.

T3- Recession 15% 4 0.6 T3. Recession has affected customers’ willingness to send greater risk in investments.

TOTAL SCORE 1.00 3.8

Michael Porter’s 5 forces

Rivalry Among Competing Firm

There is intense competition in the coffee market amongst established coffee shops that are fighting to get customers. There are local coffee shops offering specials to lure potential customers in. Restaurants are opening earlier and closing later to accommodate customers on the go. With the 85% North American customers taking their coffee to go, convenience is a major factor.

Potential of new competitors

There is a great deal of risk of entry by potential competitors due to the low start up costs. McDonalds is able to add specialty coffee to their existing services to tap into the specialty coffee market. There is potential f $125,000 per year in revenue to be made by each store if they are able to successfully enter the specialty coffee market.

Potential Development of Substitute Products

Water is a substitute which is healthy for us and it is free. The option to buy bottled water is also inexpensive compared to coffee. With the focus on healthier living, water is the ultimate choice.

Bargaining power of suppliers

There is more bargaining power for suppliers of technological innovations such as automated coffee machines, latte and espresso machines, etc. because there are not as many suppliers for such equipment as there are for coffee beans.

Bargaining power of Consumers

Customers 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.

Porters’ Forces

VALUE CHAIN

Product Development

Bean and Ingredient Selection

Product Distribution Store Front Take Home

Products

New Value Chain

Product Development

International Development

Bean and Ingredient Selection

Product Distribution

Online Storefront

CustomizationStorefront Mobile Apps

FacilityTake home Products

Mission StatementOctober 2008 - Present

Need to expand Internationally instead of opening outlets in US

Action Plan & Recommendations

• Product Development & Market Development• Rewards Programs ( introducing loyalty cards )• Rent out meeting space with more official facilities

available.• CD burning• Continually Improve Quality of Coffee.• Increase marketing• Sales promotions• Increase connection with Customers• Promote healthy products

Starbucks’ Billboards

• In 2008, Starbucks had put up a number of billboards in Seattle

STARBUCKS’ ADVERTISMENTS• On May 3rd, 2009 Starbucks had launched a long term, multi channel

campaign. It’s goal was to emphasize the unique experience, exceptional coffee, and the brand’s quality value

Another Ad Campaign

• Another ad campaign for Starbucks was for the Frappuccino beverage. Starbucks had launched two campaigns at the same time in 2010

• Via Instant Coffee• Frappuccino drinks Frappuccino campaign had emphasized Customization for the drink

Oh, wait.“Starbucks is testing letting its customers

pour their own coffee at some stores. Customers can pay before or after getting their own drip coffee from a brewer near the condiment bar, the company said on

its new customer-feedback website.”

Q & A ??

Thank You