INTRODUCTION

Starbucks is the largest coffee outlet in the world, with close to seventeen thousand shops in approximately fifty countries or provinces.

It is headquartered in Seattle, Washington.

Starbucks is an international Corporation whose stocks are traded on the NYSE.

Starbucks in 2003 was listed as a Fortune 500 firm, ranked 465. By the end of 2010, they were ranked 241.

HISTORY

2007-08 – McDonlad entered coffee business & Starbucks closed 600 stores in U.S.

During 2000,Opened 200 Stores outside U.S.

1987 – Howard Schultz joined Starbucks.

1993 – Ventured with Barnes & Noble

1992 – Starbucks decertified the union and made IPO.

1971 – Starbucks Coffee, Tea, and Spice store (coffee bean roasting) opened in Seattle’s Pike Place Market.

LOGOvolution

VISION STATEMENT

“To inspire and nurture the human spirit- one person, one cup, and one

neighborhood at a time.”

Mission

Our Coffee

Our Partners

Our Customers

Our Stores

Our Neighborh

ood

Our Sharehold

ers

PR

OD

UC

T

PR

OM

OTIO

N

SEG

MEN

TS

TA

RG

ETIN

G

PO

SIT

ION

IN

G

PLA

CE

PR

ICE

SKIMMINGPENETRATION

DOWN-STREAMING

UNITED STATESINTERNATIONALGLOBAL CONSUMER PRODUCTS

MARKETING

• Dunkin’ Donuts• Caribou Coffee• Peet’s Coffee and Tea

• McDonald’s• Krispy Kreme Doughnuts

COMPETITORS

RATIOS

Gross Profit Margin

Operating Profit Margin

Net Profit Margin

Return on Total Asset

FORMULA

Gross Profit/Sales

Operating Profit/Sales

Net Profit/Sales

Total Assets/Sales

2007

59.1%

11.5%

7.2%

56.9%

2008

55.2%

4.8%

3%

54.6%

FINANCIAL POSITION

STRENGTH

Starbucks is the market leader in

the coffee Market.

Customers are satisfied with the quality and taste

of Coffee.

High brand equity.

Operating in 40 countries

worldwide.

Huge number of employees’ approx. 13 thousand.

CHALLENGES

Pricing are higher as

compared to the

competitors.

High operating

cost·

The business profits are

highly dependent on

coffee product.

OPPORTUNITIES

Entry into Asian market like

Pakistan, India and Bangladesh.

Market penetration in International

countries.

Co-branding with other food

manufactures.

Whole bean sales in supermarkets

like.

THREATS

Numbers of competitors are increasing, like

Barista, Café coffee Day, Gloria jeans

coffee.

Variation in coffee prices in developing

countries·

People started to become more

health conscious·

Labor Unions issues in US and

international countries·

Starbucks facing huge resistance in

international countries over cultural and

political issues.

SC

OT A

NA

LYS

IS

SO Strategies• Do advertisements

about the FREE internet connections and the excellent service they provide.

• Starbucks shall increase the healthy products into market as the demand for it is high.

CO Strategies• Reduce the price and

Advertise the products all over the places.

• Do R&D to sell products at supermarkets without reducing the quality with cheap price

ST Strategies• Starbucks needs to

change its market strategy by reducing the price to compete with the competitors.

CT Strategies• Create new

complementary products which contain good quality and lower price to attract more customers.

• Starbucks needs to analyze the way to reduce the risks of selling its coffee products at supermarkets as customers are demanding for it.

SCOT STRATEGIES

1. Rivalry among

competing sellers in

the industry

2. Threat

of substitut

e product

& services

5. Power of

buyers.

3. Potential of new

entrants

4. Power of

suppliers.

STARBUCKS’S FIVE-FORCE COMPETITIVE ANALYSIS

Political

Economical

Social

Technological

Legal

Environmental

PES

TLE A

NA

LYS

IS

IE MATRIX

BCG MATRIX

SPACE MATRIX

GRAND STRATE

GY MATRIX

QSPM MATRIX

Strong3 to 4

Average2.0 to 2.99

Weak1.0 to 1.99

High 3 to 4 I II III

Medium2.0 to 2.99 IV V VI

Low1.0 to 1.99 VII VIII IX

THE TOTAL IFE WEIGHTED SCORE

THE

TOTA

L EF

E W

EIG

HTE

D S

CORE

IE M

ATRIX

II

• Backward, Forward or Horizontal Integration.• Market Penetration

• Market Development• Product Development

I

• Market Penetration• Market Development• Product Development

• Divestiture

III

• Product Development• Diversification• Retrenchment• Divestiture

IV

• Retrenchment• Divestiture• LiquidationM

ARKE

T G

ROW

TH R

ATE

RELATIVE MARKET SHAREHIGH

HIG

HLO

W

LOWB

CG

MATR

IX

BC

G M

ATR

IX

 KEY FACTORSRATIN

G1. A Starbucks asset is financed through equity and is safe if creditors start to demand repayment of debt. Long term debt-to-equity ratio is only 0.0017

4

2. Starbucks Return on Asset ratio shows that in year 2008, the efficiency of using assets to generate earning has increased from 12% to 14%.

3

3. Even during recession they have

earned a decent amount of net

income .

5

TOTAL 12

  KEY FACTORS RATING

1. Starbucks Coffee Liqueur was the top selling new spirit product, grossed sales over $8million annually.

4

2. Starbucks agreed to serve Starbucks Coffee in all United flights.

3

3. “Starbucks Everywhere”

approach has increased foot traffic

for all the stores in area. This

makes customers easy to fine

Starbucks all the places in town.

5

 TOTAL 12

FINANCIAL STRENGTHS

INDUSTRY STRENGTHS

SPACE MATRIX

 KEY FACTORSRATIN

G

1. Starbucks products prices are high

compared with competing coffee

houses. They price their products

several dollars below then Starbucks

price.

-4

2. Demand for Starbucks products to be

supplied in supermarkets increase. But,

doing that will put Starbucks business

in risk as customers don’t know the way

to brew the coffee.

-2

3. Increase in world coffee bean price in

2001, forced Starbucks to increase its

beverages and coffee sold at retail.

-3

 TOTAL -9

 KEY FACTORSRATIN

G

1. Starbucks coffee and beverages are

high in quality brewed by well trained

employees.

-1

2. Starbucks teamed up with T-mobile WI-Fi service to provide internet access to all over Starbucks Coffeehouse

-1

3. There are 16,120 Starbucks

coffeehouses worldwide and plan to

open another 1800 stores.

-2

4. Starbucks is a customer oriented Coffeehouse.

 -2

 TOTAL -6

COMPETITVE ADVANTAGE

ENVIRONMENTAL STABILITY

FS Average is 13/3 =

4.3

IS Average is 12/3 =

4.0

ES Average is -9/3 = -

3.0

CA Average is -6/4= - 1.5

Directional Vector

Coordinates:

X- axis: 4.0 + (-1.5) = 2.5

Y- axis: 4.3 + (-3.0) = 1.3

GR

AN

D S

TR

ATEG

Y M

ATR

IX

QS

PM

M

atr

ixKEY FACTORS WT STRATEGY 1 STRATEGY 2 Strategy 3

AS TAS AS TAS AS TAS

OPPORTUNITY

Gourmet coffee consumption rose with the drinker's educational level. 0.1 2 0.2 4 0.4 1 0.1

16 % of the U.S. Adult population consumed specialty coffee on a daily basis, whereas 63 percent indulged occasionally 0.08 4 0.32 3 0.24 2 0.16

The growth in popularity of specialty coffees has increased, as only 13 percent and 59 percent of people reported daily and occasional consumption, respectively, in 2002 0.09 3 0.27 4 0.36 2 0.18

Another trend that has surfaced in the past decade has been consumer requests for organic coffees, and more emphasis was placed by retailers on the growing environment of the beans 0.1 2 0.2 4 0.4 3 0.3

Consumers are becoming more health conscious and are looking for sweets and snacks that are low in carbs / sugar and calorie 0.08 1 0.08 4 0.32 3 0.24

International market has a stronger economy and accordingly, consumers would be able to pay premium price for specialty or gourmet coffee 0.09 2 0.18 3 0.27 4 0.36

THREATS

The 2007-2009 global recession negatively affected the specialty coffee industry 0.1 4 0.4 2 0.2 3 0.3

Recent trends have shown that some of the consuming public is concerned about the nutritional value of such products as those offered by the specialty coffee sector and have even challenged the correctness of the labeling and calorie information posted on the products available at retail outlets.

0.09 4 0.36 1 0.09 3 0.27

Smaller competitors are expanding their markets as well as their product line offerings 0.1 2 0.2 3 0.3 4 0.4

Competitors such as McDonald's and Dunkin donuts are becoming stronger in offering specialty coffee along with other complementary products 0.1 4 0.4 3 0.3 2 0.2

Volatility in the stocks and coffee price could impact the purchasing power for the buyers 0.07 - - - - - -

TOTAL 1 28 2.61 31 2.88 27 2.51

QS

PM

M

atr

ixKEY FACTORS WT STRATEGY 1 STRATEGY 2 Strategy 3

AS TAS AS TAS AS TAS   weight strategy 1 Strategy2 Strategy3strenghths    AS TAS AS TAS AS TASStarbucks expects to add approximately 20 net new stores to its global store base in fiscal 0.06 4 0.24 3 0.18 2 0.122009 by closing approximately 425 company-operated stores in the United States and adding of approximately 60 company-operated stores internationally 0.05 2 0.1 1 0.05 4 0.2The company plans to open approximately 65 net new licensed stores in the United States and approximately 320 net new licensed stores internationally 0.07 3 0.21 2 0.14 4 0.28Licensing revenues increased primarily due to higher product sales and royalty revenues as a result of opening 438 new licensed retail stores in the last 12 month 0.07 1 0.07 3 0.21 4 0.28Strong marketing and promotional campaign such as product placement in major TV series 0.09 4 0.36 3 0.27 2 0.18Starbucks also provides electrical outlets and, in some stores, wireless access, for customers who might need to use their MP3 players or laptop computers 0.06   0   0   0Starbucks' products can be found in convenience stores, grocery stores, department stores, movie theaters, businesses, schools, and even airports 0.07 2 0.14 4 0.28 3 0.21Starbucks is rated by Fortune as one of the best top 10 places to work 0.04   0   0   0

Starbucks also encourages the use of its Web site where customers are able to register their Starbucks' cards, receive nutritional information about Starbucks' products, shop online, search for careers, and much more 0.06   0   0   0

      0   0   0

weakness     0   0   0

47 percent drop in earnings in one year (2008) 0.07 4 0.28 3 0.21 2 0.14For the 26 weeks ending March 2009, Starbucks' revenues decreased 7 percent to $4.95 billion and net income decreased 72 percent to $89.3 million 0.06   0   0   0

Moody's Investors Service recently downgraded Starbucks' credit ratings 0.04   0   0   0The U.S. company operated retail business continued deteriorating trends 0.06 3 0.18 3 0.18 4 0.24For the second quarter of fiscal 2009, U.S. total net revenues were $1.8 billion, a decline of $131.5 million, or 6.8 percent, due to decreased revenues from company operated retail stores. 0.06 2 0.12 3 0.18 4 0.24

Many of Starbucks' International operations are in early stages of development that require a more extensive support organization relative to the current levels of revenue and operating income in the United States 0.03 3 0.09 2 0.06 4 0.12International total net revenues were $433.7 million for the 13 weeks ended March 29, 2009, down $59.7 million, or 12.1 percent, compared with the same period last year, primarily due to the impact of a stronger U.S. dollar relative to the British pound and Canadian dollar. 0.04 3 0.12 2 0.08 1 0.04Global Consumer Products Group (CPG) total net revenues decreased by 2 percent to $94.8 million for the second quarter of fiscal 2009, due primarily to lower margin on sales of packaged coffee as a result of discounting, as well as lower volume to the trade. 0.07 4 0.28 3 0.21 2 0.14  1 35 2.19 32 2.05 36 2.19Sum Total     4.8   4.93   4.7

Starbucks success is achieved through a few factors:• Outstanding Quality of the coffee brewed• Excellent service provided at the stores• Fast growth of new stores all around the world

Starbucks encounters aggressive competition in all areas of its business activity, specially by McDonalds and Dunkin’ Brands.

Their strategy remains one of progressive expansion with measured caution. It is gradually increasing its ground in international markets.

As Starbucks have a good financial capacity with good strategies; it can overcome all the competitors to shine high as the first class coffee purveyor. C

ON

CLU

SIO

N

Corporate Level

• Starbucks’ coffees price are much more expensive than other market competitor products because Starbucks’ purchases the highest quality coffee beans and price-war advantage for its competitors in these challenged economic times.

• Even though Starbucks has its own customer who spends their money to get the quality coffee, it still has to look for the other people who are running to the next store.

Functional Level

• Advertisement can develop through internet. Starbucks innovative nature should enable capitalization on the social networks like Twitter and Facebook. Additionally, Starbucks should even have mobile application.

• Not to change its positioning from luxury to low cost coffee provider because Starbucks enjoy very high high customer loyalty.

• They should grow more affiliation of ‘Seattle’s Best Coffee’ with other QSR’s just like they did with Burger King and increase its awareness as a subsidiary of Starbucks.

• Distribute packaging of Starbucks instant coffee will definitely increase the sales as it is a demand from customers.

Business Level

• Develop series of new coffee, tea and fruit drinks with better nutritional values for health conscious customers. Initially, enter selected market with predatory pricing strategy and then move to larger market.

• For the last few years, the company over-expanded by opening too many stores and some too close to each others. Thus, reduce the low/non-performing outlets and especially those which are very close to each other.

• Establish more stores in developing nations like China and India where the impact of recession was very low.

• Provide Starbucks coffee in Premium Airlines and Seattle’s Best Coffee in Economy Airlines.

REC

OM

MEN

DA

TIO

NS