Starbucks - Strategic Management

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KEY FACTORSRATING1. 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 0.001742. Starbucks Return on Asset ratio shows that in year 2008, the efficiency of using assets to generate earning has increased from 12% to 14%.33. Even during recession they have earned a decent amount of net income .5TOTAL12KEY FACTORSRATING1. Starbucks Coffee Liqueur was the top selling new spirit product, grossed sales over $8million annually.42. Starbucks agreed to serve Starbucks Coffee in all United flights.33. 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. 5TOTAL12FINANCIAL STRENGTHSINDUSTRY STRENGTHSSPACE MATRIXKEY FACTORSRATING1. Starbucks products prices are high compared with competing coffee houses. They price their products several dollars below then Starbucks price.-42. Demand for Starbucks products to be supplied in supermarkets increase. But, doing that will put Starbucks business in risk as customers dont know the way to brew the coffee.-23. Increase in world coffee bean price in 2001, forced Starbucks to increase its beverages and coffee sold at retail.-3TOTAL-9KEY FACTORSRATING1. Starbucks coffee and beverages are high in quality brewed by well trained employees.-12. Starbucks teamed up with T-mobile WI-Fi service to provide internet access to all over Starbucks Coffeehouse-13. There are 16,120 Starbucks coffeehouses worldwide and plan to open another 1800 stores.-24. Starbucks is a customer oriented Coffeehouse.-2TOTAL-6COMPETITVE ADVANTAGEENVIRONMENTAL STABILITY

FS Average is 13/3= 4.3IS Average is 12/3= 4.0ES Average is -9/3= - 3.0CA Average is -6/4= - 1.5Directional Vector Coordinates: X- axis: 4.0 + (-1.5) = 2.5Y- axis: 4.3 + (-3.0) = 1.3

GRAND STRATEGY MATRIXQSPM MatrixKEY FACTORSWTSTRATEGY 1STRATEGY 2Strategy 3ASTASASTASASTASOPPORTUNITYGourmet coffee consumption rose with the drinker's educational level. % of the U.S. Adult population consumed specialty coffee on a daily basis, whereas 63 percent indulged occasionally0.0840.3230.2420.16The growth in popularity of specialty coffees has increased, as only 13 percent and 59 percent of people reported daily and occasional consumption, respectively, in 20020.0930.2740.3620.18Another 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 beans0.120.240.430.3Consumers are becoming more health conscious and are looking for sweets and snacks that are low in carbs / sugar and calorie0.0810.0840.3230.24International market has a stronger economy and accordingly, consumers would be able to pay premium price for specialty or gourmet coffee0.0920.1830.2740.36THREATSThe 2007-2009 global recession negatively affected the specialty coffee industry0.140.420.230.3Recent 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.0.0940.3610.0930.27Smaller competitors are expanding their markets as well as their product line offerings0.120.230.340.4Competitors such as McDonald's and Dunkin donuts are becoming stronger in offering specialty coffee along with other complementary products0.140.430.320.2Volatility in the stocks and coffee price could impact the purchasing power for the buyers0.07------TOTAL1282.61312.88272.51QSPM MatrixKEY FACTORSWTSTRATEGY 1STRATEGY 2Strategy 3ASTASASTASASTASweightstrategy 1Strategy2Strategy3strenghths ASTASASTASASTASStarbucks expects to add approximately 20 net new stores to its global store base in fiscal0.0640.2430.1820.122009 by closing approximately 425 company-operated stores in the United States and adding of approximately 60 company-operated stores internationally0.0520.110.0540.2The company plans to open approximately 65 net new licensed stores in the United States and approximately 320 net new licensed stores internationally0.0730.2120.1440.28Licensing 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 month0.0710.0730.2140.28Strong marketing and promotional campaign such as product placement in major TV series0.0940.3630.2720.18Starbucks also provides electrical outlets and, in some stores, wireless access, for customers who might need to use their MP3 players or laptop computers0.06000Starbucks' products can be found in convenience stores, grocery stores, department stores, movie theaters, businesses, schools, and even airports0.0720.1440.2830.21Starbucks is rated by Fortune as one of the best top 10 places to work0.04000Starbucks 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 more0.06000000weakness00047 percent drop in earnings in one year (2008)0.0740.2830.2120.14For the 26 weeks ending March 2009, Starbucks' revenues decreased 7 percent to $4.95 billion and net income decreased 72 percent to $89.3 million0.06000Moody's Investors Service recently downgraded Starbucks' credit ratings0.04000The U.S. company operated retail business continued deteriorating trends0.0630.1830.1840.24For 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.0.0620.1230.1840.24Many 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 States0.0330.0920.0640.12International 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.0.0430.1220.0810.04Global 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.0.0740.2830.2120.141352.19322.05362.19Sum Total4.84.934.7CONCLUSIONRECOMMENDATIONS