German University in Cairo

Strategic Analysis for Starbucks
Prepared By: 12-


Taghred Khattab Ehab Aziz Bassem Naguib

Class: Strategic Analysis 704 Monday from 8 PM to 10 PM

Represented to: Dr. Saneya El Gallaly


Table of Content


1- Introduction
* In 1971 Starbucks opened operations in Seattle’s Pike Place Markets with the future aim of providing coffee to a number of restaurants and surrounding bars. With the recruitment of Howard Schultz who led the marketing and retail efforts of Starbucks. * In 1982, the company took a change in direction through the views of Schultz, who after visiting Italy tried to adapt the same principles in order to a strong bar culture. Schultz then utilized Starbucks ability to provide quality coffee beans and opened up a new store called Il Giornale, which brewed coffee from these particular beans. * In 1987, Giornale had decided to take over the assets of Starbucks and also, further changed its name to Starbucks Corporation. By the end of the year, Starbucks had increased the number of stores to 17 and furthered its location span by entering Chicago and Vancouver. * In 1990, the company took further steps forward with expansion of the Seattle headquarters and an increase in resources with the opening of a new roasting plant. Relationships and other ventures also took off during the early nineties as the company looked to development organizations to further its progress. *In 1995, the company really established its name with the opening of the 676th store as well as increasing the products in store with the addition of compact discs a result of a previously popular experiment with ‘in-house’ music. * In 1996, the company kept on stretching its reach by entering into the market of Japan, Singapore and Hawaii. This was achieved through joint ventures including the one formed with Sazaby Inc., which pushed through the development of coffee houses in Japan.


United Arab Emirates. Hong Kong. Bahrain. Canada. Taiwan. New Zealand. things had progressed so far that 3. the company had ventured into countries ranging from England to Australia & China.1 Current performance Overall. 2. This goal is quite close to being achieved as proved the Starbucks current locations in international markets and the successfulness of these ventures. Saudi Arabia. which further strengthens the mission to become one of the leading specialty coffee retailers in the world.Current situation The current international situation for Starbucks seems to be an emerging part of their business and the reorganization of this is proved by their aim to become a leading global company through making a difference in people’s lives all around the world. Israel. the aim of becoming a worldwide global brand seems to be working in favor of the company and is helping it to attract the attention of many major companies who would like to share a partnership. Singapore. Lebanon. 2. total international stores became 5113 store & 11567store in United States. Oman. United Kingdom. and the United States. Kuwait. Switzerland. Egypt. Japan. Qatar. 4 . * By last quarter of 2008. South Korea. The current countries in which Starbucks are located in are: Australia. Malaysia. Thailand.*By the year 2000. Philippines. This is all positive news for the company because it provides a strong basis for future development of international markets.300 stores were already opened. Peoples Republic of China.

5 million for the same period a year ago. 2.Roasting and fresh delivery of our coffee. Net income was $158. and 61 company-operated stores in Australia. the net revenues increased 3 percent to $2.4 billion for the fourth quarter of 2007.Provide a great work environment and treat each other with respect and dignity.1 million of restructuring charges and other transformation strategy costs. which included $105.mission “To inspire and nurture the human spirit— one person. and one neighborhood at a time” “The mission of Starbucks is to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow” None of this success would have been possible without a set of goals that the company aimed to achieve and a set of principles. 4. which governed the decision making process. 2.2 Strategic posture 1.000 open and filled positions within its leadership structure and non-store organization.S. compared to $2.Apply the highest standards of excellence to the purchasing.5 billion for the fourth quarter of 2008.Embrace diversity as an essential component in the way we do business. Starbucks reported net income of $5. The company actions announced in July of 2008 to close approximately 600 company-operated stores in the U. For the 13-week period ended September 28. 5 .4 million. and reduce approximately 1. 2008.However. 3. one cup. The six principles of Starbucks are stated as: 1.

about quality.Contribute positively to our communities and our environment. 6. roasting and fresh delivery of its coffee. but supports the customers as well. making a note that they should be satisfied all of the time.” This statement supports the idea that Starbucks uses the best available resources to give it a recognized and respected name. It not only supports the employees. and improving the lives of people 6 .5. Application of these principles can be used as a guideline for all employees from managers to workers to aim to achieve the company’s goals. Another supporting sentence in the mission statement is that the “company applies the highest standards of excellence to the purchasing.Objectives & Strategies: Here are the following objectives of Starbucks: Our Coffee It has always been. This mission statement along with the set of guidelines provides a focus for employees as they make strategic decisions. We’re passionate about ethically sourcing the finest coffee beans. and will always be.Develop enthusiastically satisfied customers all of the time. roasting them with great care. The mission shows alignment with the vision by stating how the company plans to reach the broad goals set by the vision statement. while maintaining a certain type of standard. and recognize that profitability is essential to our future success. 2.

and we take our responsibility to be good neighbors seriously. Our Partners We’re called partners. It’s really about human connection. because it’s not just a job. a place where you can meet with friends. It’s about enjoyment at the speed of life—sometimes slow and savored. laugh with. We can be a force for positive action— bringing together our partners. Together. sometimes faster. it’s our passion. The world is looking to Starbucks to set the new standard. Our Customers When we are fully engaged. it starts with the promise of a perfectly made beverage. and uplift the lives of our customers— even if just for a few moments. We want to be invited in wherever we do business. Our Stores When our customers feel this sense of belonging.who grow them. our work is never done. Now we see that our responsibility—and our potential for good—is even larger. customers. and the community to contribute every day. our stores become a haven. We care deeply about all of this. we embrace diversity to create a place where each of us can be ourselves. Always full of humanity. we connect with. We always treat each other with respect and dignity. a break from the worries outside. but our work goes far beyond that. Our Neighborhood Every store is part of a community. We will lead. Sure. Our Shareholders 7 . yet again. And we hold each other to that standard.

8 . From all what mentioned above that Starbucks is aiming to success through quality of product.4 3. which means that the company is not using both the equity and their assets properly to increase their revenue. diversify in business and place.We know that as we deliver in each of these areas. we enjoy the kind of success that rewards our shareholders.2 8.03 from 6. through pleasant and nice existence nearly to everyone. to satisfy customers and shareholders.3 Financial Analysis The general financial performance for Starbucks in 2008 was declining from the previous years dramatically.2 Both the ROE and ROA are lower than the industry’s average. Profit Margins % Gross Margin Pre-Tax Margin Net Profit Margin Company 16 4.3 in 2007. We are fully accountable to get each of these elements right so that Starbucks—and everyone it touches—can endure and thrive.8 13.6 25. The following analysis will show this fact.6 5. 2.03 Industry 27 13.5 Starbucks margins are lower also that the industry’s average. Investment Returns % Return On Equity Return On Assets Company Industry 12. especially in 2008 where the net profit margin reduced to 3.

Management Efficiency Company Industry 9 .46 1 0.300 494. and this considers a financial strength for the company.383.000. especially in 2008 when it reached almost half 2007.000 0 Years Although the total sales was increased in the last 4 years.000 600.467 10.000 6.000.000 100.40 0.80 0.48 Industry 0.259 2005 6.497 315.000 9.000.000 10.000 300.000 700.000 800.000 500.000 0 2005 2006 2007 2008 Sales Net Income Value USD 8.500 672.000.Financial Condition Debt/Equity Ratio Current Ratio Quick Ratio Company 0.000 2.000.000 4.411.000 400. the net income was reduced.942 564.000 200.786.000.369.638 Growth Rate 12.7 Starbucks generally manages their debs and liabilities wisely. Year Sales Net Income 2008 2007 2006 7.

Of the nine members of Starbucks board. Starbucks president and CEO Howard Schultz chair the board. the board has 9 directors. their Board of Directors has adopted governance principles and committee charters to lead Starbucks governance practices. one is Latino.6 1. Board diversity is sought in terms of members’ personal and professional backgrounds. There are three committees of the board are comprised of independent directors and have specific charters: Audit and Compliance. In Starbucks there are well-defined criteria for the selection of new board members.7 3.Inventory Turnover Asset Turnover 12. gender. culture and gender in the board was one of the greatest Starbucks strong points. That the diversified background. race. ethnicity or other differentiating characteristics.Corporate governance Board of directors As part of Starbucks mission they are committed to maintain their uncompromising principles while they grow. foremost being a clear demonstration of their own personal integrity and ethics. enabling a wider range of opinions and perspectives to be considered. Securities and Exchange Commission.6 1. This criterias of selection affected the company in a very good way that gave it the opportunity to succeed in the international market. 10 . and one other female also serves on the board.83 20.S. a substantial majority of whom meet all of the independence requirements of NASDAQ® and the U. Currently. education. In this regard. two are African American (one of which is female).

consistent with each other. This change demonstrates Starbucks ongoing commitment to strong corporate governance and effectively communicated to partners. In addition. Committee charters. Shareholders and partners (employees) can provide recommendations and feedback to the board through the Business Conduct Helpline and the Audit line. 11 . (2) the date the director resigns. Director nominees must receive more “for” than “against” votes to be elected in an uncontested election. the board amended the company’s bylaws to include majority voting to allow shareholders to play a more meaningful role in the election of directors. and is supported by Starbucks Policy Office and staff. Additionally. In November 2007. Starbucks formed a Policy Governance Council in fiscal 2006 to oversee and approve governance tools at the global enterprise level. an individual director or to any of Starbucks independent board committees. and to ensure they are well-defined. governance principles. or (3) the date the board of directors fills the position. director nominations policy (including criteria for board membership) and profiles on each board member are available in the corporate governance section of Starbucks. The Council is comprised of company leaders who represent multiple business units and functions. written correspondence can be sent to the board. stored for easy retrieval.Compensation and Management Development and Nominating and Corporate Governance. the term of a nominee who does not receive a majority of the votes cast will end on the earliest of either: (1) 90 days after the date election results are certified. current.

Starbucks stakeholders include partners (employees). suppliers. Starbucks could no longer depend on the U. community members. Starbucks had to venture abroad. This became a burden on the mother company in a later stage. market for growth. This is along with inability to engage in global strategic coordination. That those types of entry moods need a lot of training.S. customers. licensing and wholly owned subsidiaries. environmental groups. To maintain its growth rates and to boost revenues. governments. Starbucks also sold merchandise. farmers. The company engaged them to be able to understand their concerns and gain their input on topics of mutual importance. management assistance and technology transfer for the partner. it started selling CDs of its famous in-house music program. It also entered into alliances with 12 . This presence is formed in three modes in entry that are Joint venture. with the market reaching saturation. Starbucks came out with new products to attract customers on different periods. supervising. activists and many others. That along with serving coffee. in the mid 1990s.External Environment: Opportunities and Threats Starbucks international operation was one of the major aspects of their success. shareholders. . the success of Starbucks is not only to its aggressive expansion but also to its product innovation. 4. However. Starbucks international presence is now in more than 25 countries and the United States of America. Also diversification was one of the factors that Starbucks started to apply even on a small initiated base. In 1995.

Also they are not dealing with suppliers who don’t follow the same environmental ethics that are for Starbucks. 13 . Also dealing with small suppliers instead of dealing with limited number of big power full suppliers is not giving them real good deals for facilities and prices. to serve Starbucks coffee.1 Michael Porter’s five forces Michael Porter defines five forces impacting a firm's competitiveness— threat of substitutes.2 Societal Environment Economics Economic factors are an important aspects that concern the nature and direction of the economy in which a firm operates. Inc. This is in its domestic market and even in the international market specially Europe and Middle East. and Barnes & Noble. 4. Suppliers bargaining power is really represent a threat for Starbucks. bargaining power of customers. The company is facing a real threat of substitution from many other companies that producing the same product that is satisfying the same need. bargaining power of suppliers. Also Starbucks is facing a real problem of rival competition due to its uncompetitive price all over the world and even in its domestic market. Starwood Hotels. United Air Lines. That they decided to deal with a 51% women or minority owned suppliers.. This may lead them to lose a good opportunity or deal with a supplier that they will not deal with him. 4.various players such as Canadian Airlines. Also the taste of Coffee had been judged by customers as an artificial taste especially in Japan. and the intensity of competition within the industry. A firm's strategic decisions to respond to these five forces are a source of risk also. threat of new entrants in the industry.

Germany. Coca-Cola and Estee Lauder 14 . where it experienced declining sales and revenues. With the introduction of the Starbucks Card for example. After U. Starbucks faced problems due to economic recession in countries such as Switzerland. Political/Legal 1. the business environment. Most if not all Starbucks location has WI-FI for consumer needs.S. Furthermore. Burger King.Increasing tensions between the United States and the rest of the world. and Japan in the early 2000s. a real expectation of huge recession during the next year due to the worldwide financial crisis may affect the company’s results badly. due to the alleged close relationship between the United States and Israel. Moreover.S. the Company has created the opportunity to improve customer service. In July 2002. especially in the Middle East and Southeast Asia. Arab students called for a boycott of American goods and services. This created serious problems for Starbucks. The boycott targeted U.Starbucks also faced criticism from Non Governmental Organizations (NGOs) that urged the company to acquire certified coffee beans. was becoming increasingly volatile. Technological Starbucks is continuously searching for ways to better a customers’ experience. companies including Starbucks. shorten lines and make a customer’s visit at Starbucks quicker and more convenient. declaration of war on Iraq in early 2003 matters became worse for the company. ensuring that those coffee beans were grown and marketed under certain economic and social conditions.

Starbuck’s is denying all liabilities in these cases. Till now in the Arab countries & Middle East a lot of rumors that Starbucks is sponsoring the Jewish community against Palestinian crises. the company has installed a list of principles that further outline the company’s willingness to make sure that its affect on the environment is as positive as possible. Starbucks are challenging the status of Starbucks California store managers and assistant managers as exempt employees under California wage and hour laws. so possible threats could include a change in import laws. the company has agreed to the settlement in order to take care of all of the plaintiffs’ claims without having to get involved in any protracted litigation.Understanding of environmental issues. Social/Cultural Environmental Mission Statement (Starbucks is committed to a role of environmental leadership in all facets of our business) As a result of Starbucks closely following their objectives.Starbucks only imports all their coffee beans. Starbucks and Sheilds vs.2.In addition to these incidents. For example. which would affect the level of consumption for Starbucks coffees. 4. The lawsuits entitled Carr vs. however. Due to increasing security threats. 3. 15 . These principles are stated as: 1. Starbucks closed down its six stores in Israel. Starbucks topped the list of companies to be boycotted due to Schultz's alleged closeness to the Jewish community.Starbucks had two class action suits pending since 2001. if it costs more to import or the process is made more difficult the result could ultimately be a change in price. A change in the status quo as far as imports go could greatly affect numerous areas of production for the company.

sell and use environmentally friendly products. which only allow the company to purchase from those other businesses (suppliers) who follow the same environmental strategy as Starbucks.2. and encouraging all partners to share in our mission.Measuring and monitoring our progress for each project.Recognizing that fiscal responsibility is essential to our environmental future. 5. because the supplier doesn’t follow the company environmental policies. 3.Striving to buy.Sharing information with our partners. 4. 16 .Developing innovative and flexible solutions to bring about change.3 Task Environment Not only this but also. Starbucks organizing activities such as neighborhood clean-ups and walk-a-thons. This may push the company to lose an opportunity of good deal. 4. Policies that also have been implemented are the buying policies. 6.Instilling environmental responsibility as a corporate value. Many examples are available on the web site of the company. Those can only be seen as a positive for the image of the company and shows that they are willing to utilize their resources in order to more than satisfy requirements. 7.

to integrate these policies to new employees. In May 2003. and the company also performed badly in Europe and the Middle East. It was reported that most of Starbucks' international operations were running into losses. 17 . Starbucks' Japanese operations reported a loss of $3.9 million (Japan constituted the largest market for the company outside the United States). It was also observed that the volatile international business environment made it difficult for the company to effectively manage its international operations. operations. Summary of External factors TO However.Finally.” which installs the environmental views into trainees as well as coming up with inventive ways of helping the environment. it was found that the success of Starbucks was due to its profitable domestic operations. Analysis pointed out that Starbucks' international operations were not as well planned as its U.S. Starbucks has employed the services of a few partners which congregate together to create a “Green Team.

24 0.4 External Environment (EFAS) (SWOT) External Factors SR Opportunities O1 New Markets with low investments O2 Coffee Market Growing Worldwide O3 O4 Product range diversification to more food and non-food items New distribution channels (delivery) Threats T1 T2 T3 T4 T5 T6 Boycotting for Political reasons (Middle East and Arab) Financial Crises and Recession Increase in Domestic competition Volatile coffee and dairy products US market saturation Consumer trends toward more healthy ways and away form caffeine Total 0.1 0.49 0.15 0.4 0.08 0.4 0.1 0.1 0.32 0.6 0.3 0.1 0.27 3.12 0.32 0.09 1 4 4 4 4 4 3 0.08 3 4 2 3 0.4 0.08 0.4.24 Weight Rating Weighted Score 18 .

and cross functional teams. It consists of to main departments. finance and human resources. and this created good culture.2 Corporate culture The Chairman of Starbucks. Schultz decided to treat employees as family. and let them share in the decision making process. Both full time and part time employees could benefit from training and health insurance.5. The decision making process in Starbucks is bottom – up process. Employees had option to stock chare according to their base salaries. Schultz decided also to be open and honest with his employees. He 19 . Starbucks paid some more salaries than competitors to gain highly qualified employees. Also Starbucks had shared values with their employees who made them proud to work in such successful company.1 Corporate Structure Starbuck has no formal organization chart and does not work with hierarchy structure.Internal Environment: Strengths and Weaknesses 5. functional department consists of marketing. 5. There is a conflict in the corporate structure where some employees are reporting to two different divisions which in some cases causing confusion and over lapping. operations. supply chain. Starbucks relied on its baristas and other frontline staff to a great extent in creating the ‘Starbucks Experience' which differentiated it from competitors. and called them partners. consisting of local store marketing and marketing campaigns. where the employees are empowered even to take decisions without referring back to the management.

Environment was important to Starbucks.3. Starbucks also market itself as environmentally friendly and focus on its corporate social responsibility.4% of revenues. which is difficult to be imitated by competition. It has a reputation for having pricey drinks. Another important part of Starbucks’ positioning over competition is that they are environmentally friendly. or 1.1 Marketing The main marketing strategy and position for Starbucks is for customers to consider it as their place after home and work.gave extensive training to employees especially barista employees to give careful attention to customers. which could be risky from competition. Starbucks has deep tacit knowledge. Also it encouraged all partners to share in the company’s mission. The Company advertises a lot through print mediums. In 2005. one example is buying Ethos-Water 20 .3 Functional strategies 5. 5. Starbucks spent $87. However it seems to be the market leader when it comes to new products and ideas. The company mainly depends on the brand for their high revenues. Using this concept Starbucks gave good attention to their suppliers by helping them technically and financially as part of their corporate social responsibility.7 million on advertising. However it also customizes its positioning for each store individually according to the specific location it is in. this will guarantee customers visiting the shops several times. as Starbucks’ target market tends to be educated people who do more reading than the average person. Starbucks has found more success advertising on a local level rather than to the nation as a whole. furthermore. Starbucks does not generally offer promotional prices on its products. Starbucks brand is too expensive.

or get into joint ventures with existing companies. 21 . But they focus on their operation on the quality of their coffee. The company spent 7.3. They are managing all stores in USA. shorten lines and make a customer’s visit at Starbucks quicker and more convenient Starbucks is continuously searching for ways to better a customers’ experience.2 Million in 2008 for new technologies related to food and equipment. that’s why they focused on training employees as they are the main asset in the company. they are in the international operation sometimes manage their store. however.3 Operations and logistics The main operation for Starbucks divided into local operation in USA and international operation. Starbucks has created the opportunity to improve customer service. Starbucks depended mainly on their employees to manage operation. 5. or give licenses.3.2 R&D The R&D role in Starbucks is to make a R&D mix and mainly consists of the following activities:  Coffee Science  New Technology  Equipment Technology  Product Development  Menu Development  Coffee Quality Assurance  Sensory Science The introduction of the Starbucks Card for example.Company and they also plan to donate $ 10 million to help countries under developed lacking clean water. 5.

Although the company did not reveal the amount it spent on employees. Starbucks maintains a turnover rate of only 60 percent.Starbucks deals with international small suppliers. 82% of the partners rated being “very satisfied” and 15% as “satisfied” with their jobs when asked by outside audit agencies. the company began to show signs that its generous policies and high human resource costs were reflecting on its financial strength. They mainly use non-smoking restrictions in their stores. Starbucks has lowered their training time and costs. Starbucks was one of the few retail companies to invest considerably in employee training and provide comprehensive training to all classes of employees. Early 2000s. it said that it spent more on them than it did on advertising While the industry turnover rate is about 200 percent. which is very risky as if they lost some of the key persons.3. So the company hired people for qualities like adaptability.4 Human Resources Starbucks paid considerable attention to the kind of people it recruited. however in some countries because of culture conflicts they had to have either smoking rooms or smoke areas in the air. this is due to the low turn over they have and their focus on employee satisfaction. Due to this low turnover. One of the main advantages Starbucks has is the accumulative experience of their employees in operation. Furthermore. Starbucks made good deals with their suppliers to supply coffee with fixed prices rather than using the Fair Trade Coffee. dependability and the ability to work in a team. 5. 22 . including part-timers Company depends on their personnel in their high revenue.

3.5. The site also offers services such as the Starbucks “Taste Matcher” tool. use computer software or send voice mail messages.5 Information System Starbucks is following this major trend of moving towards multimedia Direct Marketing Solutions and Web-based models. The IS department in Starbucks focuses mainly on:  Business Applications Development  Production Services  Retail Business Systems  Strategic Architecture 23 . The MIS department affects Starbucks partners whenever they open a store cash register. which interactively recommends specifics coffee roasts and blends bases on customer’s preferences. Its introduction has increased customer loyalty as well as attracted new customers to Starbucks stores. Moreover in late November 2001 Starbucks Debit card was introduced in US. Most if not all Starbucks locations have WI-FI for consumer needs. Customers visit its web site to buy coffee products and gifts. and to learn more about the art of roasting and brewing coffee.

1 0.12 0.12 0.37 0.08 1 1 3 3 3 0.08 0.12 0.4 0.3 0.09 0.1 0.6 0.11 0.33 0.24 3.1 0.32 0.4 Internal Environment (IFAS) (SWOT) Internal Factors SR Strengths S1 S2 S3 S4 S5 S6 High Brand Equity Satisfied Employees Exclusive coffee products Economies of scale in purchasing Widespread and consistency Strong financial foundation Weaknesses W1 High prices W2 Over dependency on coffee and coffee related products W3 Lack of internal focus (too much focus on Expansion) W4 Cross Functional management Total 0.1 5 4 4 4 4 3 0.3 Weight Rating Weighted Score 24 .36 0.5.4 0.

6.36 0.32 0.08 0.27 0.08 1 Ratin g 5 4 4 2 3 4 4 4 2 4 4 4 Weighted Score 0. SFAS.32 0.08 0.09 0.45 0.32 3.09 0.36 0.28 0.08 0.07 0.07 0.28 0.09 0.09 0.19 X X X X X X Long X X X X X X Duration Intermediate Short 25 .18 0.18 0.32 0. SWOT Analysis SR S1 S2 S4 W1 W2 W3 O1 O2 O3 T2 T3 T4 SFAS High Brand Equity Satisfied Employees Economies of scale in purchasing High prices Over dependency on coffee and coffee related products Lack of internal focus (too much focus on expansion) New market with low investment Coffee Market growing worldwide Product range diversification to food and non food items Financial Crises and Recession Increase in Domestic competition Volatile coffee and dairy products Total Weight 0.09 0.09 0.

26 .7. expect for changing the product scope to include products more than the coffee for good diversification. Objectives: The Company can keep the same current objects as it serves the current situation of the company. Just one object should be added which is: Invest in other product for either related or unrelated business to maintain the success. Reviewing mission and objective Mission Statement: Starbucks should keep their mission statement as it reflects the current situation as well.

as the domestic market is the main source of revenue. 2.Reduce costs to reduce price in order to survive in the current financial crises. 1.Reduce costs to reduce prices in low investment markets and get benefits from the growing markets. Threats T2 Financial Crises and Recession T3 Increase in Domestic competition T4 Volatile coffee and dairy products 1.Make backward vertical integration using the economies of scale to avoid volatile of coffee and dairy 9.Depend on international alliances in the international stores to focus on the domestic market to avoid competition. Strategic alternatives (TOWS analysis) Internal factors Strengths S1 High Brand Equity S2 Satisfied employees S4 Economies of scale in purchasing Weaknesses W1 High prices W2 Over dependency on coffee and coffee related products W3 Lack of internal focus (too much focus on expansion) External Factors Opportunities O1 New market with low investment O2 Coffee Market growing worldwide O3 Product range diversification to food and non food items 1. 2.1 Corporate Strategy 27 .8.Diversification to related businesses to overcome the dependency on the coffee and increase product range.Use the experienced employees to diversify in other related businesses. 2. 2. Review strategies 9.Grow vertically to include other low cost countries using the good brand. 1.Differentiate using the high brand to prevent domestic competition.

2 Business strategy Domestic Business Unit: Should focus on more differentiation to face the hard local competition. Starbuck should make strategy of good price reduction strategy in order to enter new markets and maintain current customers. One more strategy should be added to Diversify in related business to secure the company. International Business Unit: Should focus on reducing costs to reduce prices.3 Functional Strategies Marketing Starbuck should continue in their existing marketing strategy for promotion and advertising. Research and Development Starbuck can continue in their R&D strategy by being the Technological leader in the coffee retail business. Operation Strategy Starbuck can continue in the current strategy for depending on employees in management and to make good deals with suppliers to reduce costs. 9. Information System 28 .The corporate strategy should continue in Retrenchment as they started in July 2008 close stores to reach 600 by the end of 2009. this will help in entering new low cost markets and gain more profits. as they depend only on coffee products. Also continue with alliances in countries to reduce management focus and concentrate more on the Domestic Market. Human Resources The company should continue in developing and motivating employees as they are their best assets. 9.

11. Evaluation and Control Starbucks should evaluate their performance quarterly in 2009 to avoid any accumulative losses and to take quick corrective actions. with decentralization for products-group structure. 2.Net profit for each country to separate between profitable and non profitable countries. o Start new independent Business Unit for New products. 10. Implementation The company can implement the above strategies by: o Use the best of their Economies of scale to reduce costs.The company should continue in developing their Information System to help the company increasing profitability.ROI for any new investment they made and for the old investments as well. o Depend on the outsiders of their board to get potential new investments in new businesses.Net profit for each store to separate between profitable and non profitable stores. 3. 29 . The best evaluation method for Starbucks will be financial evaluation by measuring the following: 1. o They should reduce cross functional tasks to reduce confusion between employees and increase efficiency.

htm#mis 4.collegeresearch. References 1. University of Haway. 30 .http://company.www. Kim 2002.www.html'-marketingstrategy. Starbuck Coffee Corporations.Starbucks Annual Report. 3.

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