You are on page 1of 28

Good morning my dear colleague, its a pleasure to be here .

Thank you very much for coming

today, and its great to have Mr.Zein Arifin here with us as you all know he guiding us for
preparing our presentation.
My talk today entittled Starbucks s strategic analysis Past decision and future options

Well, ladies and gentleman the objective of my presentation today is describing the Starbucks
past decisions and their new strategies

Im going to divide this talk into 6 chapters. The first chapter namely Starbucks snapshot, in this
part I will describe about who is Starbucks, overview about their history and some data about
their expansion. Moving on to next chapter I would like to explain what is Starbucks original
generic strategy , I will elaborate this later. Next we have Michael porters five forces analysis
past & present comparison, this model is to develop an optimum strategy for success based on
specific parameters.
Turning to chapter 4 I will describe some factors behind Starbucks success

Having thoroughly analyzed the past, present and future of the specialty coffee industry and the
general strategies necessary to attain success, in chapter 5 I would like to explain some
recommendation for Starbuckss future action. The last chapter of my presentation is summary
& conclusion.
Well, if everyone is ready lets start

This is the picture of first store in Seattle,Washington. Right now, Starbucks become world
leading coffee company

Starbucks was established in 1971 in Seattle by 3 scholars. At first they specialized in whole
beans coffees, later move to espresso drinks and other baverages

This is the 3 founder of Starbucks

This is Howard Schultz, the CEO of Starbucks. In 1982, he was hired as a director of retail
operation. While on a business trip in Italy he visits famous espresso bar, he sees potential in
Seattle. Schultz wanted to bring the Italian caf culture to the United States. Selling espresso by
the cup was the first test, he began working with the founder Jerry Baldwin

Schultz left Baldwin to open his own and raised money from investors to purchase the Italian
Coffee House Giornale.

Il Giornale acquires Strabucks assets in 1987 with the backing of local investor and changes its
name to Starbucks corporation.Opens in Chicago and Vancouver Canada. At that time, total store

Now, turning to Starbucks mission, this is the mission of Starbucks now and then. To accomplish
current mission, Starbucks has seven principles which is Our Coffee, Our Partners, Our
Customers, Our Stores, Our Neighborhood, Our Shareholders and Onward that guild all of the
employees as they go about the daily business.

Let us proceed to Starbucks menu. Basically, there are 3 products : drink, food and merchandise.
Right now there are more than 30 blends & premium coffee, as we can see from that picture they
sell various fresh food like sandwiches, salad, pasteries & baked, beside that they also offer
Merchandise for example coffee tea brewing equipment, mugs, coffee makers etc.

Lets now take a close look at this bar graph. This is the bar graph of Starbucks retail expansion
from 1987 to 2010 . This bar graph show us the trend between 1987-1993 are stable this is due to
Starbucks expands beyond Seattle, first to the rest of the United States, then the entire world.
Ladies and gentleman,as you can see This bar graph show us a significant rise in the Starbucks
retail expansion ,its more than doubling every two years , with 425 stores in 1994 to 1006 stores
in 1996, and its keep growing until now. This is due to their integrated strategy e to expand their
brand around the world. Essentially, it was Starbucks mission to have a green twin tailed siren on
every street corner. Right now Starbucks have 20.159 stores across the world as we can see in
this picture below

The next area Id like to focus on strabucks original strategy. As defined by Michael Porter there
are three potentially successful generic strategies: overall cost leadership, differentiation and
Overall cost leadership can be done through tightly controlling overhead, avoiding marginal,
less profitable consumers and sacrificing research and development, customer service,
advertising and other areas not pertinent to the direct manufacturing of a product.
Differentiation ,This can take on many different forms including but not limited to brand image,
technology, features, dealer ,networks and customer service.
The last generic strategy mentioned is focus, which targets a particular group, geographic
market, or segment of a given product line

Looking at the characteristics of a company pursuing the generic strategy of focus, as illustrated
by Michael Porter, it would involve a combination of the characteristics of the differentiation
strategy directed toward a specific consumer segment. Their target consumer was a wealthy,
educated, coffee drinker who preferred quality and customer service over a discounted price

Moving on now to success factors of starbucks. This is the three factors behind their success I
will elaborate one by one

In today's interconnected world it is important to develop a feeling of community. Ray

Oldenburg, a Florida sociology professor, attributes much of Starbucks success to its ability to
offer this third place or as he puts it, the great good place in modern society. Two of the most
prevalent themes during the 1990s and early millennium were that of increasing numbers of
people working from their homes and the increasing use of the Internet and mobile computing
devices capable of accessing it. Today, Starbucks has gone to great lengths to take advantage of
these environment change. For example, they have recently struck a deal with AT&T, which will
allow them to offer free wireless internet access to some customers at the majority of its US

The second factor is employee satisfaction. From the perspective of the Starbucks corporate
team, the quality of the baristas and other employees was the most important ingredient of
Starbucks success, next to the specialty coffee itself. By involving all employees in the equity
success of the company, Starbucks effectively created a clear incentive for employees to both
reduce costs and treat customers with exceptional service.

The last facor of starbucks succsess is maintaining quality of Arabica beans. There are many
different reasons why an organization such as Starbucks would undertake a strategic alliance
with an organization such as Conservation International. Some of the primary reasons include
the attempt to reduce risk, the attainment of economies of scale, preemption of competition, an
attempt to overcome government barriers.
By collaborating publicly with Conservation International, Starbucks stands to increase their
legitimacy with other NGOs, thus reducing the risk of protests and the negative implications
those protests would have on their brand image. This alliance also allowed Starbucks to attain
economies of scale in regards to their ability to contribute positively to the community and the

Now we turning to Michael porters five forces analysis. In this part I compare between past and
present in order to make us undrestand the different between past and present starbuckss
environment. The first comparison is industry rivalry The environment in which the specialty
coffee industry had to compete during the late 1980s was made up of both product based
competition and retail-based competition, they now compete against companies of varying sizes
and different exposures to specialty coffee.
Turning to second factor the potentials for new entrance Cumulatively, the barriers to entry seem
high in the specialty coffee industry in the late 1980s due to high product differentiation, high
specialized capital requirements . Nowdays it can be ascertained that the barriers to entry in the
specialty coffee industry have increased substantially. As a consequence, the potential threat of
new entrants has gone down.
Let us proceed to the third factor

In the past, the only true direct substitute for specialty coffee available was basic coffe. However,
basic coffee was considered to be of significantly lower quality than specialty coffee. As a
result, it actually presented the industry with little threat of substitution. Today, Many companies
that presented the specialty coffee industry with a threat in the form of substitute products have
actually entered the industry and now compete directly by offering their own premium coffee
selections. The primary substitute products still posing a threat to the specialty coffee industry
are the caffeinated soft drinks offered by Pepsi and Coca-Cola.
Now we will move on to bargaining powers of buyers. Overall, then, the bargaining power of the
buyers or customers of the specialty coffee industry, which consisted largely of individual
consumers, was not substantial. The consumer does not know the actual demand, market prices

or supplier costs which greatly reduces their bargaining power. The amount of bargaining power
that can be exerted by the buyers within the specialty coffee industry today,has increased as a
result of the availability of information regarding market variables. This along with the other
previously discussed changes to the dynamics of buyer bargaining power has increased its
overall magnitude from the level it was at in the late 1980s.
The last factor is the suppliers bargaining power. When comparing the bargaining power of
suppliers today in the specialty coffee industry to the bargaining power of suppliers during the
late 1980s, it is apparent that suppliers are more powerful today. The increased unity among the
coffee farmers, decreased significance of specialty coffee retailer's purchases as a proportion of
premium coffee bean sales and increased importance placed on high quality coffee beans by the
purchasers have all acted to increase the bargaining power of the supplier group.

Lets turn now to recommendation for future action. Having thoroughly analyzed the past,
present and future of the specialty coffee industry and the general strategies necessary to attain
success, a list of recommendations specific to Starbucks can be ventured. First, increase
international expansion . The international market provides an ideal target for expansion because
the lack of penetration of specialty coffee in many nations and the potential market share which
these nations represent.
The second ,rewards program Starbucks should concentrate on creating more elaborate
discounting techniques to employ with their most frequent customers. This both eliminates the
potential degradation of the Starbucks brand and increases the bond customers will experience
with Starbucks.
Next, Starbucks should create a more business and technology friendly atmosphere in its stores.
The meeting space should be offered at a per hour rate while the printers should charge per copy.

Lastly, increase connection with customers, Specifically, Starbucks encourages feedback from
their customers to induce a family like feeling and instructs all baristas to greet every customer
with the question how are you doing today?. To further increase this emotional connection
with their customers, Starbucks could implement digital picture frames in all store locations and
upload local customer photos and perhaps even customer supplied family photos, which are
appropriate in nature, upon request.

Finally, let me remind you of some of the issues we've covered. The first
starbucks store opened in seattles pike place market in 1971 and the company grow

to be largest roaster in Washington with multiple location in early 1980.The Starbucks

Original Generic Strategy is differentiation and focus. Since the 2009 recession, the
company has sharpened its focus on increasing international store count to mitigate
the risks attributable to local unfavorable economic conditions. It has also been
attempting to improve international brand awareness.
Their success was fostered as a result of some action taken by starbucks.the
starbucks aggressive expansion plan was more ambitous than any other speciality
cofee retailer. At starbucks, employee satisfaction also played a pivotal role in their
success Factor which added to their success was their ability to consistently produce
the highest quality speciality coffee Overtime the speciality coffe industy has become
much more competitive.

Finally, we can conclude that Starbucks corporation has arguably been the most
successful coffee chain in the pas t few decades, using their aggressive expansion
strategies to push out much of its competition.Through its expansion, starbucks has
focused on creating a dense network of stores all around America, while also opening up
new location around the world .

I think thats all my presentation entitled Starbuckss strategic analysis- past decision and future
option. Thank you for your time and your attention. As always, let me know if you have any
questions about presentations or this particular topic by email me.