Professional Documents
Culture Documents
Katie Tewell
Bethany Odom
Kelly Snider
What was once a small coffee shop opened by Gerald Baldwin, Gordon Bowker,
and Ziev Siegl in 1971, Starbucks Coffee Company has grown into the number one
specialty coffee retailer. With over 10,000 coffee shops in more than 30 countries, of
which 4,200 are licensed and franchised and 6,000 are owned, the company’s main
objective is to establish Starbucks as the “most recognized and respected brand in the
world,” (Moon).
By working toward this goal, Starbucks wants to open new stores in both new and
existing markets, expand their product development process, and cater to customers’
needs to eventually improve their financial position and dominate market share.
Market Summary
• Target Markets
o Over time, market research teams have recognized the new target market
as “younger, less well-educated, and in a lower income bracket than their
more established customers,” (Moon).
o Nonetheless, the original target market has not disappeared, but has
expanded into the demographic of the store location. For example,
southern California stores cater to a growing number of Hispanic
customers.
• Market Demographics
o Geographics (Moon)
Data from 2002 showed that in the Southeast there was only one
store for every 110,000 people. Whereas in the Pacific Northwest,
there was one store for every 20,000 people. Hence, the company
was far from reaching existing markets.
o Demographics
• Market Needs
o Selection
o Accessibility
Starbucks operates over 10,000 retail stores. Most of the 4,200
franchised stores are located in shopping malls and airports.
Starbucks coffee brands are also marketed through grocery stores
in the form of beans and even ice cream flavors.
o Customer Service
o Competitive Pricing
For North American stores in the 2002 fiscal year, the average
price of an order was $3.85. The drinks come in three sizes: tall,
grande, and venti (Italian for small, medium, and large). The least
expensive price for a tall drink is $1.40 for brewed Coffee of the
Day. The most expensive price for a venti is $4.15 for
frappuccino. Whole beans are sold in half and whole pound bags
ranging from $5.20 to $15.95 (Moon).
Specialty Specialt
Coffee y Coffee
27% 31% Traditio
Tradition nal
al Coffee Coffee
73% 69%
o Estimates for the U.S. retail coffee market in 2002 include:
o Over the next few years, an estimate for the U.S. retail coffee market
expects specialty coffee to have a compound annual growth rate (CAGR)
between 9%-10%.
o As of 2002, coffee consumption had risen with more than half of the
population (about 109 million people) drinking coffee everyday, and an
additional 52 million drinking coffee on occasion.
• Market Growth
o Reports show in 2002, the number of specialty coffee drinkers has become
the market’s biggest growth.
SWOT Analysis
• Strengths
o Starbucks is very profitable and has a strong financial base, therefore allowing
the company to undertake new business ventures.
o Respected employer
o Disciplined innovator
Has the ability to roll out new products relatively quickly, which
translates into a considerable competitive advantage
• Weaknesses
Vulnerable to the possibility that their innovation may falter over time
Company growth is mostly driven by beverage innovation.
o More than 75% of the company’s stores are in the USA (DataMonitor).
o Dependent on the retail of coffee, which could make them slow to diversify
into other divisions if the need should arise
Company’s 5 year average ROE (13.65%) have been lower than the
industry average (15.09%) (DataMonitor).
Need to effectively manage its finances to ensure that returns are at par
of higher than industry average
• Opportunities
o In 2004, created a CD-burning service where customers can create their own
music CD
New markets for coffee are beginning to emerge; for example, in India
and the Pacific Rim (SWOT).
o Rising economy
o Growth in coffee markets: Starbucks has a market share of over 40% of the
special coffee market (DataMonitor). Therefore growth in this category would
result in considerable opportunities for further growth and expansion in the
near future.
• Threats
o Coffee may not stay in favor with customers, and another type of beverage or
leisure activity could replace it.
o Rises in the costs of dairy products could affect the company’s margins.
o Competition
Restaurants
Street carts
Lingering encouraged
Franchise/Large Companies
• Services (Company)
o Offers newspapers and other reading material, popular music, and Internet
access (provided by T-Mobile)
Reduction of price
o Other critical issues Starbucks is criticized for and must be aware of are:
Clustering
Loss of diversity
Fair trade
OTHER
21%
31% Undecided/Already
Satisfied
Slice 5
Marketing Strategy
• Starbucks Mission Statement (Company)
o Provide a great work environment and treat each other with respect
and dignity.
o To create a Starbucks experience that makes people come for the coffee,
stay for the ambience and environment, and return for the connection
o Open new stores with lower store-opening costs (about $315,000 per store
on average).
NEW EXISTING
CUSTOMERS CUSTOMERS
(FIRST VISIT (FIRST VISIT 5+
THIS YEAR) YEARS AGO)
High-quality brand 34% 51%
Brand I trust 30% 50%
For someone like me 15% 40%
Worth paying more for 8% 32%
Known for specialty coffee 44% 60%
Known as the coffee expert 31% 45%
Best-tasting coffee 20% 31%
Highest-quality coffee 26% 41%
Overall opinion of Starbucks 25% 44%
o The chart shows that the new customers have a poorer attitude toward
Starbucks in every category than the existing customers.
Average age of 36
o Target areas with favorable demographic profiles, as well as areas that can
be serviced and supported by the company’s operations infrastructure.
For each targeted area, select a large city to serve as a focal point.
With this plan, the company had only closed 2 of the 1,500 sites it
had opened between 1992 and 1997.
o Stores must be custom-designed.
Office buildings
Airport terminals
University campuses
Kiosks
Drive-through windows
• Positioning
o Store Ambience
Physical layout
Aromas
Sounds
o Customer Service
• Marketing Mix
• Marketing Research
How could Starbucks reach people who were not coffee drinkers?
properly presented?
Financials
Starbucks Corporation
Annual Balance Sheet
amounts in millions of US dollars (except per share amounts)
Shareholders' Equity
Preferred Stock Equity -- -- --
Common Stock Equity 2,090.6 2,474.2 2,082.4
Total Equity 2,090.6 2,474.2 2,082.4
Shares Outstanding (mil.) 767.4 397.4 396.5
Starbucks Corporation
Annual Cash Flow Statement
amounts in millions of US dollars (except per share amounts)
Starbucks Corporation
Earnings Estimates
Period Mean # of
Period Ends EPS Estimates Year Ago Actual
Starbucks Corporation
Comparison To Industry & Market
1
Industry: Eating and Drinking Places
2
Market: Public companies trading on the NYSE, AMEX, and NASDAQ
Top Competitors
New World
Starbucks Diedrich Coffee Dunkin Restaurants
Controls
customer satisfaction.”
so, we can still serve our customers who want a taste of Starbucks on-the-
go.
• Marketing Organizations
information about market and customer trends is not overlooked like it has
been in the past and we can make better decisions about driving our
The team researched the art and literature of coffee throughout the
ages, studied coffee-growing and coffee-making techniques, and
looked at how our retail stores have already evolved in terms of
design, logos, colors, and mood.
• Contingency Planning
• Time Implementation
References
Moon, Youngme, and John Quelch. Starbucks: Delivering Customer Service. Harvard
College. Boston: Harvard Business School, 2003. 1-20.
Overholt, Alison. "Thinking Outside the Cup." Fast Company. July 2004. Mansueto
Ventures LLC. 3 Dec. 2006 <http://www.fastcompany.com>.
Simmons, John. "Starbucks: Supreme Bean." Brand Channel. 21 Nov. 2005. 6 Dec. 2003
<www.brandchannel.com>.
Thompson, Arthur A., and John E. Gamble. "Starbucks Corporation." 1999. The
McGraw-Hill Companies. 3 Dec. 2006 <http://www.mhhe.com>.