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Starbucks History Starbucks opened operations in Seattle's Pike Place Markets in 1971 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. By 1987, Il 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. By 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. By the year 2000, things had progressed so far that 3,300 stores were already opened, the company had ventured into countries ranging from England to Australia and a website was created to keep up operations with the latest technology (starbucks.com). 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 peoples lives all around the world (http://www.starbucks.com). This goal is quite close to being achieved as proved the Starbucks current locations in international markets and the successfulness of these ventures. The current countries in which Starbucks are located in are: Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, New Zealand, Oman, Peoples Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Switzerland, Taiwan, Thailand, Untied Arab Emirates, United Kingdom, and the United States. (starbucks.com) Overall, 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 (starbucks.com). This is all positive news for the company because it provides a strong basis for future development of international markets, which further strengthens the mission to become one of the leading specialty coffee retailers in the world. In addition to the fact that Starbucks has already successfully opened around 3,500 stores, the push' to achieve their goal is proved more than ever by the aim to open at least 650 stores just in Europe by the year 2003. It's these types of goals which prove the potential of this brand to become so popular and well known, that it would be as recognizable as major names such as McDonalds and Coca-Cola. Vision As stated on the website, the company's vision is to the world.' establish Starbucks as the most recognized and respected brand in
This is a fitting vision because it is a broad comprehensive picture of what the company wants Starbucks to become. We will examine the vision using four components. First the vision is built on a foundation of the organizations core values. Starbucks only uses the finest coffee beans when brewing its variety of blends and therefore wants to be looked at with the respect of a company that uses and provides the best. Secondly, the company desires a top of the mind recognition. Starbucks not only wants consumers to remember who it is, but think about Starbucks first, having a shining image. Third is a summary of what the organization does. Starbucks is lacking in this component because it fails to provide a statement announcing what exactly what business Starbucks is in. It assumes that as a recognized brand it does not need to specify what business the company is in. The mission statement in the next section provides a much better description of this component. Finally, the vision states broad goals of what the company could be. Starbucks wants to be the most recognized and most respected brand in the world. The most recognized and the most respected are the two broad areas of this statement. Ideally the two mean number one, or above all others, but there is no numeric goal, or timeline for this objective. The overall company operations are based around purchasing and roasting high-quality whole bean coffees and selling them along with fresh, rich-brewed, Italian style espresso beverages, a variety of pastries and confections, coffee-related accessories and equipment. This is achieved through the huge number of company operated retail stores, a specialty sales group, supermarkets, a direct response business and also on the World Wide Web at the Starbucks.com website (starbucks.com). The attainment of this goal is boosted by the rapid expansion of new retail stores, in addition to the development of many new opportunities in terms of products and distribution channels. Mission 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, which governed the decision making process.
and capuccinno.com). Then we will discuss some of the major actions of the publicly held company from 1992 to present. and seeing that the vast quantity of coffee and expresso bars. Contribute positively to our communities and our environment. Recognize that profitability is essential to our future success. (Business & Company. Private Company 1971: Starbucks began when three friends-English teacher Jerry Baldwin. He was met with resistance as the owners did not want Starbucks to sell beverages (Business & Company). The first is when Starbucks was a Private Company. partnerships. 2002) 1983: After visiting Milan. We believe that there since the beginning. Apply the highest standards of excellence to the purchasing. and writer Gordon Bowker opened a store called Starbucks Coffee. April 1986: Schultz left Starbucks to fulfill his idea of building expresso bars around the Seattle area and opens II Giornale. while maintaining a certain type of standard.com) It was an Expresso Bar that was designed to sell coffee. The owners prided themselves on their knowledge of coffee bean and of educating customers about the benefits of dark roasting coffee. as they saw another similar store have success in the San Francisco Bay area.84 million. This mission statement along with the set of guidelines provides a focus for employees as they make strategic decisions. y y y y y y 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. in just 21 short years (fortune. etc. expresso. cappuccino. Schutlz realizes that Starbucks should be selling expresso. (Thompson) They acquired the Starbucks name. history teacher Zev Siegel. current chairman of Starbucks.350 in the store. This statement supports the idea that Starbucks uses the best available resources to give it a recognized and respected name. was hired to manage retail sales and marketing (Business & Company. from its inception in 1971. September 1982: Howard Schultz. and believed they build a client base in the Seattle area. This was a strategic decision because each they saw an opportunity in the fine coffee market. and joint ventures. By this time Starbucks had expanded to operating five stores. (Thompson) In a year and half two more II Giornale expresso bars would be opened. The three original partners each invested about $6. April 1984: Schultz finally convinced the owners to open a sixth "test" store in Seattle area. (starbucks. Vertical Integration has been another key success factor as Starbucks Corporation has integrated backwards in opening coffee roasting plants. Timeline Overview We will take the company timeline and strategic decisions portion in two main sections. stores. It not only supports the employees. It has shown concentration in being creative and relying on it's core competency of making high quality coffee and coffee equipment to develop new products and markets. Another supporting sentence in the mission statement is that the company apply the highest standards of excellence to the purchasing. This growth has taken it from a single store in Pikes Place Market in Seattle. Tea. and high quality coffee making equipment. 2002). to it's initial public offering in 1992. The six principles of Starbucks are stated as (starbucks. and a small coffee bean toasting facility. a second Starbucks was opened in Seattle (Thompson). and Spice in the touristy Pikes Place Market in Seattle (Thompson). Traditionally. but supports the customers as well. (Thompson) The store sold coffee beans. all serving Starbucks coffee.com) March 1987: II Giornale. making a note that they should satisfied all of the time. Starbucks strategy has been one of growth. They have demonstrated all dimensions of a growth strategy: Internationalization in expanding into new countries and the global market. Embrace diversity as an essential component in the way we do business.1 Billion and operations in almost thirty countries. the guidelines would more appropriately be connected to the vision.Starbucks has a clear set of guidelines which has to be followed and uses these as a direction tool for the future of the business. to a worldwide company with sales of over $2. The new name of the company would be Starbucks Corporation. (Thompson) 1972: after the success of the first store. however the company has set them with the mission statement. roasting plant. and fresh brewed coffee. After meeting with the owners early in 1982. Develop enthusiastically satisfied customers all of the time.com): Provide a great work environment and treat each other with respect and dignity. Horizontal Integration has been evident in the many strategic acquisitions. roasting and fresh delivery of our coffee. Schultz was taken in by Starbucks commitment to quality and of educating customers of the benefits of slow roasting dark coffee beans. . The mission shows alignment with the vision by stating how the company plans to reach the broad goals set by the vision statement. (starbucks. as well as selling coffee beans and high quality coffee equipment (Thompson). and the store had immediate success (Thompson). roasting and fresh delivery of its coffee. and Howard Schultz acquired Starbucks for $3. and forwards in controlling the distribution of it's many products.
Starbucks Company entered next big market. to bring Starbucks into Japan in 1995 and in 1996 it opened it's first international location in Tokyo.com) By 2002. a subsidiary of Starbucks Corporation.these years represent more growth and partnerships. In addition Starbucks Japan. Between 1987 through 1990 Starbucks entered new markets. (starbucks. This would be the first major acquisition in Starbucks history. to name a few. to sell coffee products at its bookstores (Business & Company. market. 2002). for over US$60 million (BBC News Online.and Howard Schultz was the new CEO. 2002.This year Starbucks continues to break through into new markets in new countries.com). His goal was to open 125 stores in the next five years. bringing the total amount to 4.com). and San Juan by end of 2002 (Business Wire) (starbucks. and began it's long-term relationship with Barnes & Noble. the North American Coffee Partnership. China. with over 1. 2002). He referred to every employee as a "partner" in the company (Thompson). 1998) 1999 . California.Starbuck acquired the Seattle Coffee Company.400 new locations.During 2000. where Albertson's is centralized (Albertson's.com) 1996 .851 billion in 2001. Japan. Inc.com). 1998)." (Business & Company. United Kingdom. approximately 1. now he was horizontally integrating in the Seattle market by acquiring Starbucks. a Japanese corporation.015 Starbucks locations (starbucks. and by 1990 there were 84 (starbucks. With operations in almost thirty countries. there were 17 Starbucks locations. for $23 million (Business & Company. In addition. Starbucks Size Starbucks is a global corporation with 4. and continued to grow. with plans to open over 600 locations in Europe alone by 2003 (starbucks. Schultz had a business strategy to retain high quality employees by making Starbucks a great place to work. Taiwan.com). Starbucks entered into a contract with Host Marriott International. It also formed a strategic alliance with PepsiCo. and Spain. "the first privately held company to establish an employee stock option program that included part-timers. 25 more than the original plan (Thompson). 1999).There were two major events during 1999. including an acquisition of The Coffee Connection. to manufacture and distribute coffee drinks. People were associating Starbucks with high quality coffee and it was becoming a very social atmospheres. 2002) (starbucks.com. became the "number one brand of coffee ice cream in the United States. 1992 . 2000. This was also a strategy by Starbucks to introduce Frappuccino . This strategic decision turned out very lucrative as Frappuccino . 1993 . they reported revenues of over $2.during this year Starbucks opened in the Washington. 2002) The second was a long-term contract with Albertson's supermarkets (Albertson's.com) (Business Wire).865 Starbucks locations were opened in the United States and abroad (starbucks. Starbucks continues to grow at a rapid pace. 2002). During these years Starbucks penetrated the approximately 15 more markets (cities) in the United States (starbucks. 1994-1995 . Schultz had already demonstrated his corporate vision and growth strategy with II Giornale. 2002). Public Company June 1992 . (Thompson) At the end of 1987.Starbucks had opened 150 new stores between the five-year period of 1987-1992. Also in 1996 Starbucks formed an alliance with Dreyers Ice Cream to introduce coffee ice cream products." By 1996 there were 1. Vancouver.709 total locations in the United States and worldwide (starbucks. This is the beginning of Starbuck's president's goal of opening 500 stores in Europe by 2003. In March of 2002 Starbucks celebrated it's first store opening in Spain. a tea company. Thailand. Sheraton Hotels.Starbucks Company was very successful after its initial public offering on the NASDAQ exchange (Thompson). ("Starbucks Japan") saw the opening of it's 300th Japanese location after winning immense popularity in Japan and financial success after it's Initial Public Offering on Nasdaq Japan September of 2001 (starbucks. an iced coffee drink. This was a tribute to the high sales and success that Starbucks was having throughout it's markets. D.C.com) During this four year growth phase Starbucks entered the markets of Chicago. and Qatar. located in the United Kingdom and comprised of 56 locations. Puerto Rico. Schultz announced a five-year growth plan to build 125 new stores. This marked the beginning of its International growth. according to starbucks. and South Korea by 1999. which. (Business & Company. Lebanon. and Portland. Starbucks also opened two more major accounts. (BBC News Online. In this deal more than 100 Starbucks Coffee bars would be opened in Albertson's grocery stores in the U. and United Airlines (starbucks. Ltd. 2001. 1991: Schultz makes Starbucks.1999). Starbucks has quickly become well established in the United States having locations in every major .. The company reported total assets of $1.64 Billion in 2001 (Starbucks Corporation). such as the United States. opened its second roasting plant. and other merchandise to new markets across the Midwest. New Zealand and Malaysia by 1998. Management believed this would be a favorable market because of it's "trendy" nature (Thompson). Australia. formed a joint venture with SAZABY Inc. which would see locations in Singapore at the end of 1996. as this continued their growth into the hotel industry (starbucks.com). Germany. has had an incredible amount of success in grocery and convenience stores. Inc. Tazo tea. Starbucks had locations in almost thirty countries (starbucks. and announced plans to open hundreds of new stores internationally (Puget.com).com) In 1988 the company started a mail order catalog for it's fine dark roasted coffee beans and high quality coffee equipment (Business & Company.S.com). The first was the acquisition of Tazo .Starbucks Coffee International.This year represented another year of substantial location growth.com) 1998 . Schultz has a strategic vision of Starbucks becoming a national company. 1991 .709.
which is far superior to the Industry average of 27.com. In terms of coffee. These include ice cream. Starbucks Scope Starbucks Corporation competes in the global arena. As of 12/1/2001 Starbucks Coffee has 51.31. it is necessary to make sure that the coffees are made of high quality beans and meet the requirements of consumers. 2001. It should be mentioned that every person has their own personal amount of coffee needed each day and so.com). 2002). Starbucks Corporation created 12. Performance / Need Analysis Consumers. This is proved by the take-away nature of Starbucks and its catering facilities for the working class. the less these requirements are met.com).91 is stronger than the industry average of 0.86.58 (Ratio. this indicates that Starbucks Corporation has the ability to satisfy it's current liabilities with it's current assets. it would be fair to base the usage rate on the number of coffees that are consumed during the day. especially those who are working. strong flavor that is maintained and that the freshness of the beverage stays longer while undesirable flavors are minimized (http://www. As previously mentioned in this case study.56. Starbucks reported 2001 Operating Income of $252. restaurants. The quick ratio.48. It is vitally important that those more popular coffee products are available to consumers while other variations are introduced on an occasional basis. Starbucks has used high quality coffee as it's core competency. Starbucks proves this point because it only purchases and roasts high quality whole coffee beans as well as adapting them into a number of different coffee variations. Within in this.914 employees in the United States.coffee. both figures increasing substantially from the previous year (Starbucks Corporation). mail-order catalogs. 26% of it's workforce is made up of minorities (nonCaucasion).com). which indicates that Starbucks Corporations inventory is highly liquid. (fortune. 2002). parttime or full-time. earnings per share.au/coffee_freshness. but the ROE is slightly weaker than the industry average of 17. Starbucks Corporation's Current Ratio of 0. Starbucks meets these requirements through providing many variations of coffee in order to satisfy as many . and also books and compact discs. and receivables of 1. This was over $500 million higher than the previous year. most prominently in the United States. Some other ratios found from Multex. and its website starbucks. ranked number 58 to be exact (fortune. Starbucks employed over 59.S.com).5million.67 (Ratio. coffee flavored drinks. regular coffee drinkers would consume about two-three cups a day. Starbucks ROA. Product Usage Rate Usage Rate: The usage rate varies according to each type of product.000 people during 2001.79 is over five times higher than the industry average of 12.htm). and ROI are both stronger the industry average. Consumers in addition to high quality coffee want to be able to taste many types of coffee variations. with a 24% Job Growth Rate (fortune. which we will now look at.650 new jobs in 2001 from a pool of over 720. reported revenues were $2. Other products such as coffee related equipment would only be purchased once in a while or when they were needed.com. Music would be purchased on a personal basis depending on if the consumers like the music available.htm). Consumers are appealed to by those companies who deal with the roasting and brewing of high quality coffees. and its operating cycles are very healthy (Ratio. Basically. it is hard to base this fact as a general description but on average. This is a major objective because the quicker the service is. and with the ratio of 0. 2002). it is important to state that each person has their own personal amounts but usually those that purchase a drink of coffee would probably purchase a biscuit or chocolate. and health coverage that allow any employee. and a Return on Equity of 14.com include a Return on Assets of 11. to benefit from. Reported gross profit increased over $100million from 2000 to $581 million. with a employment growth rate of 24% (fortune.91 it is a signal of financial strength.com). Starbucks Corporation has quite a few very strong financial ratios. Once again.649 Billion. The plans have succeeded in having a low voluntary employee turnover rate in 2000 of 23% (fortune. coffee bars. Starbucks Financial Performance During the fiscal year ending September. In terms of the other food & beverage products. including Starbucks Coffee locations.city. the average usage rate for coffee drinkers is around three cups per day.48 is a strong figure. a Return on Investment of 14.000 applicants.80. Starbucks sells its product through many avenues.627 employees outside of the U.au/coffee_robusta. Starbucks EPS. it has operations in almost thirty countries. which relates total current liabilities to cash. These requirements include thick. As the Current Ratio is the company's current assets / current liabilities. marketable securities. and is currently in many different markets. Inventory Turnover ratio is 11.com. and Total Net Income $181. supermarket coffee beans. In terms of actual coffee products. have the need to go straight into the store and straight out as quickly as possible. tea's.2 million. and should treat every one of their employees as partners.52. the more satisfied customers will be. The P/E ratio (profit/earnings) in 2001 was 49.08. Some examples of his good faith have been employee stock options plans.com). coffee brewing equipment. and 7. of 81. uniform cream at the top of Espressos. and 60% of it is made up of women (fortune.coffee. Starbucks Nonfinancial Performance Starbucks Corporation was voted by Fortune Magazine as one of the Top 100 Best Companies to Work For in 2002. consumers are in need of having high quality coffee variations made up from high quality coffee beans (http://www. Starbucks Corporation chairman Howard Schultz believes that Starbucks should be a great place to work. the less appealing coffee will be to consumers. This ratio is one more strong measure that Starbucks is a corporation that has exhibited strong financial performance.
expanded the attractiveness of the store on a whole new level. Throughout the world. Starbucks has a long-term licensing agreement with Kraft Foods. the acquirement of the Portland (USA) based Tazo Tea Company has allowed the product offerings to be expanded even further. The fact that Starbucks is mainly associated with coffee. Although Starbucks does not usually outsource operational control of its retail stores in North America. Starbucks has shown to use less of traditional advertising. Examples include the walnut flavor of Colombia Narino Supremo. many caf 's have some type of music playing the background and this is a key identification feature that further expands the experience. the Company licenses its operations. This was a useful acquisition by Starbucks because it allowed them to better meet the requirements of even more consumers and therefore. to market and distribute Starbucks whole bean and ground coffees in the grocery channel in the United States. advertising and promotions for this particular product. and dine by establishing relationships with prominent third parties who share their values and commitment to quality. Also. certain food items and select coffee-making equipment and accessories. These needs are often apart of the whole experience and include things like music. One of their guiding principles in their mission statement states. Starbucks also publishes and distributes a mail order catalog and a catalog of business gifts that offer coffees. such as movie and television placement. not only does Starbucks offer high levels of customer service. when one is bought. who develops and distributes ready-to-drink coffee-based products. For the most part. but they also strive to educate customers about coffee quality. this time it's the music company. Tazo Tea provides a number of premium teas as well as herbal teas. buttery Sulawesi (http://www.people as possible. shop.com/hearmusic/product. The Company has two non-retail domestic 50-50 joint ventures. and Starbucks cleaner and canisters. sometimes there is the need to have an assortment of small foods that are quick to consume and easy to carry. Inc. Hear Music provides Starbucks with a number of songs that are played throughout the day and this is quite an attraction for customers as proved by their constant questioning of what song is playing (http://www. stainless steel coffee filters. movie theatres. schools.starbucks.starbucks. marketing. There are also less important needs that if required can sometimes bring about potential success. This includes one with PepsiCo. and travel.asp). warehouse club accounts. Hear Music provides Starbucks with a number of compilation albums as well as favorites in order to make customers feel more at home. shop. This is another example of how Starbucks is meeting the needs of current customers as well as increasing its attractiveness to potential customers. they have a joint venture with Dreyer's Grand Ice Cream. in situations where another company can provide improved access to desirable retail space. Starbucks meets the need of consumers by another acquirement. Inc. Inc. the other one also has a greater chance of being purchased. The company has several other initiatives to enhance the customers' experience at Starbucks retail stores. travel. These relationships take various forms. instead relying more on its image advertising. Many consumers who don't drink coffee usually drink something similar like tea. many consumers can enjoy high quality coffee at home rather than traveling out of their way. The benefits of this are further increased by the fact that sometimes these chocolates can complement a coffee and therefore. Further. and distribution through its retail stores. There is an information section in each store that provides customers a good resource for becoming more knowledgeable about the world of coffee. international retail store licensing agreements. The connection here is that customers can purchase music through Starbucks as a result of the agreement with Hear Music.com/shop/product. airports. Strengths and Weaknesses Operations Starbucks specialty operations strive to develop the Starbucks brand outside the Company-operated retail store environment though a number of channels. some consumers who don't drink coffee will be less attracted by the store. Starbucks has met this requirement through providing a number of chocolate variations like gift boxes and chocolate bars while also offering sweets such as after-coffee mints and lollipops. the creamy sweet Caf Verona and the smooth. the Company is currently in the process of implementing wireless Internet access in its stores. Through the selling of coffee-related products such as brewing equipment and accessories. Hear Music. Starbucks is able to reach customers where they work. direct-to-consumer market channels. department stores. and homes. "Develop enthusiastically satisfied customers all of the time". This . Starbucks does provide a "comment card" on their web site that allows customers to give constant feedback about their experiences or concerns they may have. By establishing relationships with well-known third parties that share their values and commitment to quality. This is sometimes the case when people are looking for a quick snack to have along with their drink. controlling its coffee sourcing. in order to promote the success of the business. roasting. joint ventures and more. In building customer loyalty. Starbucks' strategy for expanding its specialty operations is to reach customers where they work. convenience stores. in addition to tea accessories and gift packs. including grocery channel licensing agreements. to develop and distribute Starbucks premium coffee ice creams. The equipment available includes Expresso machines. With Starbucks. Starbucks is vertically integrated. Score: +2 Customer Service One of Starbuck's primary objectives is to provide a superior level of customer service. For example. In addition to meeting those beverage needs of consumers. businesses. Starbucks also makes their coffee and coffee-related products available via mail order and online. Kraft manages all distribution. Starbucks has carried out their strategy by moving distribution into grocery stores. Score: +2 Marketing and Sales One of the main strengths of Starbucks over the years has been their tireless effort to make their product an uplifting part of people's daily lives.asp).
Score: +1 Technological Development Starbucks is continuously searching for ways to better a customers' experience. Stated in the Starbucks Environmental Mission Statement. the homeless. All employees at Starbucks are referred to as "partners". and economic conditions. Under the Bean Stock program. the Company has created the opportunity to improve customer service. Starbucks is confident with such relationships and believes the risks of non-delivery on such purchase commitments are remote. management noticed a decrease in traffic.is used as a means of improving the business where necessary. and AIDS research/support. Score: +1 Human Resource Management Starbucks realizes that one of their most valuable resources are their employees. Each employee is required to complete an extensive training program that includes product expertise. shorten lines and make a customer's visit at Starbucks quicker and more convenient. "Starbucks is committed to a role of environmental leadership in all facets of our business. This training gives them knowledge to answer any questions about coffee or the Company. usually quite a bit higher in price compared to their competitors. no matter what job position they occupy. Starbucks enters into long-term fixed price contracts with its suppliers to ensure an adequate supply of quality green coffee over extended periods of time. Starbucks prides itself on being a "good citizen" locally and in the international scene. the environment. To reduce the risks associated with the unpredictability of coffee price and supply. such as weather. Management understands that their employees play a major role in the growth of the company. Coffee sought by Starbucks tends to trade on a negotiated basis. For example. While the industry turnover rate is about 400 percent. We fulfill this mission by a commitment to: Understanding of environmental issues and sharing information with our partners y . Score: +2 Procurement Starbucks depends upon both its outside brokers and its direct contact with exporters for the supply of green coffee. The Company's cultural values gives employees a sense of meaning to their work even if it is just pouring a cup of coffee. Starbucks launched a series of small adjustments to improve efficiency. and the knowledge to arrange sample tastings and demonstrations with any of the equipment in the store. Starbucks maintains a turnover rate of only 50 percent. The first guiding principle in their mission statement even addresses the Company's belief towards employees: "Provide a great work environment and treat each other with respect and dignity". Professional coffee bartenders for Starbucks complete up to 24 hours of training before entering their assigned store. participate in the Bean Stock program. Starbucks has lowered their training time and costs. and well-developed interpersonal skills. employees are offered stock below the fair market value several times a year. Starbucks' employees also participate in a 401(k) profit sharing plan. Additionally. as it believes that the welfare of people. They make significant contributions to local charities that focus on children. and continue with their plans. Starbucks is proud to note that it was again rated as on of the best companies to work for by Fortune magazine. plant and product are linked. Starbucks believes they are in the coffee business as well as the "people development" business. Due to this low turnover. Starbucks believes how they choose partners is critical to their success and have listed a few criteria: Shared values and corporate culture Strong multi-unit retail/restaurant experience Dedicated human resources Commitment to customer service Quality image Creative ability. These sourcing guidelines are a flexible point system that rewards performance in sustainable categories with financial incentives. Rather than pull back from their expansion strategy. a commitment to customer service. and get a free pound of coffee each week. Score: +2 Firm Infrastructure Starbucks has proved to be a leader in identifying market trends and positioning themselves accordingly. political. before the recent economic slowdown. those who qualify for 100 points will be granted preferred supplier status with the Company's coffee buyers. Ultimately. local knowledge and brand-building skills Strong financial resources y y y y y y y During the past year Starbucks has been developing a new set of coffee sourcing guidelines. Each partner (even part-time employees) is eligible to receive health care. Supply and price can be affected by many factors in the producing countries. Starbucks strives to offer an environmentally safe product. With the introduction of the Starbucks Card for example.
They focus on quality and experience. The Starbucks Card is a wonderful convenience tool for customers that can serve as great gifts. they focus on having plenty of comfortable seating so that people feel welcome to stay longer than they might have planned.. high-visibility location in each market. instead. In November 2001. no one focuses to the extent that Starbucks has. This flexibility has attributed to the great success of the Company in the past decade.000 locations in 22 international markets. Analyst Mitchell Speiser says that.y y y y y y Developing innovative and flexible solutions to bring about change Striving to buy. from just 17 coffee shops in 1987 to over 5. Where Starbucks once had 65 different milk suppliers in the U. It is through the introduction of new products and the development of new distribution channels that Starbucks focuses on their Company's goal of becoming the most recognized and respected brand in the world. Starbucks is one of the fastest growing companies in the U. Starbucks also positions each store individually according to the specific location it is in. they come for the atmosphere. Starbucks expects full-year revenues to grow approximately 20 percent in fiscal 2002. Starbucks ended last year with more than $300 million in cash and virtually no debt.S. Starbucks has focused on improving efficiency and increasing its gross profit margins. Stores vary in size. including office buildings. study. This contributes to the overall enhancement of the customer's experience. Whatever location the Company chooses to be in. People socialize. is the second most expensive product after coffee beans. For the first quarter of fiscal 2002. Score: +3 Marketing Starbucks is the leading specialty coffee retailer in the nation.000 stores worldwide. downtown and suburban retail centers. The product mix in each store varies depending on the size and location of the store. This is evident through the continuous developments of new and exciting products.S. While other retailers position themselves in similar ways. The Company advertises a lot through print mediums. Starbucks has closed only a small number of outlets in its 30year history". which is a stored-value card that can be loaded and re-loaded in denominations up to $500. The company has realized that people don't only come for the coffee. read. Despite still following a fast-growth' strategy. they now have fewer than 25. Another important part of Starbucks' positioning is that they are environmentally friendly.500 square feet. Milk. Starbucks has had solid earnings and return.000 today. Future plans include opening at least 1. rather than price. Since the Company is able to vary the size of its stores. with an average of approximately 1. as Starbucks' target market tends to be educated people who do more reading than the average person. the Company introduced the Starbucks Card'. airport terminals. and kiosks located usually in building lobbies. Starbucks' image is one of the key elements to their success. Starbucks seems to be the market leader when it comes to new products and ideas.200 new stores during 2002 and by 2005.. or the Starbucks DoubleShot' Espresso beverage. A comparison of specialty drinks with its competitors reveals very minor differences. Score: +2 . and reduces time spent at the cash register. to have over 10. Score: +3 Research and Development Starbucks's organizational culture is one of innovation and creativity. Starbucks has less of a distinct setting for their locations. Coffee shops try to make their stores unique in some way or another that will create an appealing atmosphere. Advertising strategies used by Starbucks has also been a key success factor. the Company has managed to continue healthy operations while generating enough public funds to finance store expansion. Knowing this. Starbucks is extremely pleased with the ongoing positive customer response to the Starbucks Card. Without a doubt. sell and use environmentally friendly products Recognizing that fiscal responsibility is essential to our environmental future Instilling environmental responsibility as a corporate value Measuring and monitoring our progress for each project Encouraging all partners to share in our mission" Score: +3 Production-Operations Starbucks stores are typically clustered in high-traffic. or just enjoy the music while drinking their coffee. These consolidated net revenues are an increase of 21 percent to $805 million from $667 million for the first quarter of fiscal 2001. its focus will be on attracting high pedestrian street traffic. with over 5. Score: +2 Financial and Accounting Financially. Whether it's the new 4-cup thermal coffeemaker recently introduced to the market. "while chains like McDonalds and Wendy's routinely shutter 50 to 100 restaurants a year. for example. Starbucks takes great care in picking the right location. Starbucks stores are located in a variety of settings. Consumers seem to respond to environmentally friendly companies who seem to truly care about the future of the world. Starbucks has found more success advertising on a local level rather than to the nation as a whole. Starbucks reported record revenues and earnings. Starbucks positions their products on a relatively simple plane. this efficiency gain has saved them a lot of money.
Management Starbucks firmly believes that their employees are one of their important assets and that it's through their high quality workforce. The culture towards employees can be described as relaxed' and supportive. they have built a strong brand image that has helped them to gain a considerable greater share of the market in comparison to their competitors. Financially. they have formed strategic alliances with companies that can be more efficient and effective. Management has also created a corporate culture that promotes high productivity levels by their competent employees. and employee stock ownership programs. for the past five years. and are encouraged to think for themselves as an entity of the business. or competencies. as individual scores indicate. Management has shown to have the ability to foresee market trends and changes in consumer behaviors. long-term relationships with suppliers. As the industry leader. just slightly below Starbucks. that they are able to maintain a competitive advantage. as the industry average follows the exact same pattern/line. Competition . Score: +1 Summary of Scores Overall. "We all have this common belief in the product we sell". skills. and well-rounded company. The system provides Starbucks with the ability to centrally manage and deliver contract-based products and pricing in different languages for its global distribution. The Company has done well to establish reliable. Employees are empowered by management to make decisions without having to first report to management. exceptional employee benefits. well-established. An employee was quoted as saying.com) Chart Two: Starbucks vs. Industry This Chart compares Starbuck's stock to the Special Eateries Industry average. Starbucks is stable despite its rapid and continuous growth strategies. Score: +3 Information Systems-Information Technology Starbucks deploys Blue Martini's order management system to its retailers and channel partners. It is evident that employees at Starbucks share common goals. For the most part. Starbucks seems to be a strong. In areas where they do perhaps lack expertise. As depicted by the graph. (Source: hoovers. They have successfully built a nation wide Retail Company by creating pride in the labor force produced through an empowering corporate culture. Starbucks is fairly to very capable in most areas of its business. Starbuck's has been a defining force in the industry. Value Chain Activities Internal Audit Total +13 of a total +21 +13 of a total +18 +26 of a total +39 Stock Prices Chart One: Starbucks vs. Starbucks has avoided a hierarchical organization structure and has no formal organizational chart.
has seen a steady drop in stock prices over the past two years.com) Chart Three: Starbucks vs.com) Opportunities and Threats Economic Forces Economic factors are an important aspects that concern the nature and direction of the economy in which a firm operates. GMRC . Inc.This Chart Compares Starbucks with three major competitors in the market.. Dow Jones This graph charts Starbucks Corporation versus the Dow Jones Industrial Average over the past five years. In specific. in the past three years the stocks do not seem to be a parallel population to each other. Green Manhattan stock peaked the highest of the four around one year ago. Starbucks Corporation stock has been on a steady and consistent rise for the past five years. Overall Starbucks Corporation stock has been consistently higher than the Dow Jones. possibly because of the increased market share competition put on by Starbucks Corporation and Green Manhattan Inc. (Source: hoovers. NWCI . and has grown in price at a higher rate than the average.New World Coffee Inc. DDRX . (Source: hoovers. Inc. We chose this average because we feel it best represents the restaurant industry that Starbucks is a member. and Diedrich Coffee.Diedrich Coffee.Green Manhattan Coffee Inc. Since the relative affluence of various market segments will affect the consumption patterns. companies must take this . This is reflected by some of the similar upward and downward movements of both lines in the graph. Because of the diversity of Starbucks competition.
However. Measuring and monitoring our progress for each project. consumers tend to reduce their consumption commensurately. The growth rate of GDP suggests that the economy is growing. as well as increased competition and other factors. which only allow the company to purchase from those other businesses (suppliers) who follow the same environmental strategy as Starbucks. Starbuck's is denying all liabilities in these cases. This 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. Striving to buy. values and beliefs of an individual.S.3 billion in fiscal 1998 to $1. perceptions. Starbucks has employed the services of a few partners which congregate together to create a Green Team. An inflation rate in consumer prices in the year 2000 of 3. The lawsuits entitled Carr vs. and therefore will have greater control of the market than any other sector (CIA). . Instilling environmental responsibility as a corporate value. These principles are stated as (starbucks.963 trillion (CIA). the company's image is strengthened by its actions and shows that it is able to actively contribute with the right focus behind its activities. According to the CIA World Factbook. quality-intensive organization such as Starbucks (CIA). 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. are white 83. such as US population base per Starbucks store. demonstrates this by doing energy audits and then using the results to change store design or procedures so that they save as much energy as possible. due primarily to the Company's store expansion program and comparable store sales increases. may continue to put downward pressure on the Company's comparable store sales growth in future periods. Starbucks has two class action suits pending since 2001.' which installs the environmental views into trainees as well as coming up with inventive ways of helping the environment. Score: +3 Demographic Factors Starbucks originated in the United States. sell and use environmentally friendly products. The two largest ethnic groups in the U. as of July 2001 was estimated at 278. trends. however.88 (CIA). y y y y y y y The importance of these guidelines is further illustrated by the company's mission to show leadership towards environmental issues. management believes such cannibalization has been justified by the incremental sales and return on new store investments. Further examples of the company's actions towards environmental friendliness include the recycling and reusing of resources in order to enhance the lives of people around the world (http://www.4.com): Understanding of environmental issues and sharing information with our partners. Developing innovative and flexible solutions to bring about change. it demonstrates it through participating and organizing activities such as neighborhood clean-ups and walk-athons.com).058. the demand for coffee is price inelastic. Estimated GDP in 2000 was $9. Recognizing that fiscal responsibility is essential to our environmental future.200 suggests that Americans have the opportunity to buy specialty coffee drinks from an expensive. The Company's net revenues increased from $1. Once again. In addition to waste reduction.com) Score -1 Sociological Forces As a result of Starbucks closely following their objectives. Lastly. Policies that also have been implemented are the buying policies. to integrate these policies to new employees. This illustrates the integrity of the company as they can sometimes sacrifice opportunities if they don't follow what the company stands for. (starbucks. Score +2 Legal / Political Forces Right now. Starbucks has experienced a certain level of cannibalization of existing stores by new stores as store concentration has increased. During a recession.starbucks. A very large per capita purchasing power parity of $36.7 billion in fiscal 1999. This cannibalization.4% is a high inflation rate. the population of the U. Starbucks and Sheilds vs. In periods of normal price variation. which is the sector we will be examining for demographics. 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. This implies that the most important target market for Starbucks are people within this age group. Population facts are important to Starbucks because they can give Starbucks valuable statistics. In addition to this. As part of its expansion strategy of clustering stores in existing markets. Starbucks doesn't just rest on its laurels. it could be expected that consumers would spend less on premium luxury items such as Starbucks' coffee. GDP real growth rate was 5% (CIA). Starbucks are challenging the status of Starbucks California store managers and assistant managers as exempt employees under California wage and hour laws. However. This suggests that the economy could be heading towards recession. Encouraging all partners to share in our mission. Starbucks also aims to reduce energy usage and once again. People ages 15-64 make up the largest percentage of the population.into consideration when planning its strategy. and therefore there is opportunity for Starbucks to expand business.5% and black 12.S. The ethnic background is important to a company because it influences tastes. when coffee prices show big increases.
the average Starbucks location draws on a population base of 200. These guidelines will be discussed in more detail in the discussion of the industry bargaining power of suppliers." in large quantities for their offices (starbucks. ice cream and Frapuccino . such as price. Starbucks' customers are the buyers. Starbucks is the leading retailer.S population is growing. so possible threats could include a change in import laws.com). One of their key attributes to success is innovation. roaster and brand of specialty coffee in the world.com). from coffees. The .com). This is an opportunity for Starbucks. For example. Products purchased at Starbucks are highly differentiated and unique. The Preferred Office Coffee Provider is a plan developed by Starbucks in which companies can buy the ingredients and tools necessary to brew "the perfect cup of Starbucks Coffee. Starbucks must be weary of a high inflation rate. to. In the Sociological sector. smaller competitors can attract some of Starbucks' 200. competition is high. and innovations create a great deal of opportunity for the organization by staying ahead of what competition is doing. and a threat to potential entrants. Lingle. According to the market research firm Allegra. Score: -3 Bargaining Power of Buyers Porter's next force is Bargaining Power of Buyers. advancements. the market it estimated to grow 14%. we know that there is an enormous selection of coffees at a Starbucks' coffee shop. where Fortune ranks Starbucks number one in the industry (fortune. therefore making competition high and the threat of new entrants low.com).com). Starbucks was given a +3. At Starbucks. Einstein/Noah Bagel Corporation operates 460 bagel cafes in the U. believes that national food servers like McDonalds and Denny's could create strong coffee menus and become "the strongest competitor for Starbucks' business. The competition. to music and coffee mugs. executive director of the Specialty Coffee Association of America. Starbucks. Porters Five Forces Current Competitive Force Porter's first force that Porter describes is current rivalry among existing firms. and Einstein/Noah Bagel Corporation (hoovers. following Starbucks' lead. Starbucks is Fortune's number one most admired company in the food industry (fortune. is becoming more differentiated. which would affect the level of consumption for Starbucks coffees. Seattle's Best launched its version of the marketing product (hoovers. five months after Starbucks introduced a prepaid Starbucks debit card. In cities where Starbucks does not draw on small population bases.com): Score -2 Summary of Scores The Economic Force was scored as a -1 due to the fact that an increase in coffee prices does affect the level of consumption of the good. with an increasing GDP and large per-capita purchasing power. The technological sector was scored as a +3. Competitors are selling similar products. For example. however.com). is not equally balanced. Starbucks draws on population bases between 17. Another threat to Starbucks is that their customers have the ability to brew their own coffee. and the competition has nowhere Starbucks' volume of operations. however. Statistics have shown the industry to be slowing down." (msn. Seattle's Best. Starbucks is constantly innovating and showing strong product differentiation in their industry. as this could suggest recession. A change in the status quo as far as imports go could greatly affect numerous areas of production for the company. (hoovers. From personal experience. Starbucks' typical customer buys small quantities of their products. raises pose to be a threat.com). In the specialty eateries industry. This is a strong opportunity to build on the organization's market share because the company can attract more consumers from its competition because of its strong reputation. The reasoning behind that is that new technological changes that Starbucks is undergoing poses to help open the door for new products by improvements being made in marketing and manufacturing techniques. for example. Starbucks has tried to offset this threat by offering Preferred Office Coffee Providers as well as directions on how to make the perfect cup of Starbucks Coffee at home. The technological improvements. Seattle's Best Coffee operates 160 coffee cafes and 20 Italian coffee cafes in 17 states and 8 countries (hoovers. pose potential threats to the company. it is possible to buy a large number of products.com). For example. Justification for this score is that Starbucks has created an image of being environmentally friendly. Score: -2 Threat of Potential Entrants Porter's next force is the threat of Potential Entrants. compound market growth between 1997 and 2001 was 57% (hoovers. that there is a different kind of potential entry threat. This is the only opportunity found in Starbucks. In San Francisco and Seattle.709 locations in over 20 countries (hoovers.000 (msn. Customers will face no switching costs in switching premium coffee suppliers from Starbucks.com. This industry differentiation is an opportunity for Starbucks. The industry.com). being the world leader in its industry.Starbucks also only imports all their coffee beans. Starbucks has 4. has controlled access to distribution channels. Smaller competitors.com). (starbucks. including specialty coffees as well as high quality foods. Seattle's Best Coffee.000 (msn. It is clear that Starbucks has few major competitors. however. From 2002 to December 2004. Economic factors. but it will not drastically change consumer habits.000 person population base. however it is a minor threat considering that Starbucks has established its customer base.S competitors are Diedrich Coffee. Starbucks scored a +2 in the Demographic sector primarily because the U. In this slowing market. Starbucks has exhibited this control over distribution channels by setting guidelines for their suppliers to follow. Some believe. Also the changes will assist in improvements in existing products.com). called the "Four Fundamentals of Coffee" (starbucks. This is a threat to Starbucks.000 and 19.com). A slowing industry market growth is another threat facing Starbucks. Starbucks' current and direct U. Ted R.com).com for a customer to buy large quantities of their products. Diedrich Coffee operates 370 coffeehouses in 37 states and 11 countries (hoovers.com).com).S (hoovers. It is apparent that an increase in price might affect consumer behavior. if it costs more to import or the process is made more difficult the result could ultimately be a change in price.
" Starbucks has a degree of control over its suppliers in an industry where it is possible for suppliers of premium coffees to have an enormous amount of bargaining power.com).com). and economic issues. excellent quality coffee products. Score: -2 Threat of Substitute Products In the premium foods and coffees industry. franchising shifts the financial risk from the corporation to an individual. At a Starbucks coffee shop. These guidelines are based on the following four criteria: Quality baselines. and continue to find ways to exploit its opportunities. South and Central America produce the majority of coffee traded in the world. has exhibited how little control its suppliers might actually have. and other food industries can satisfy the customer's need to eat. the best way to evaluate this threat is to ask whether other industries can satisfy the customer need that this industry is satisfying (Coulter)." notes Starbucks fashionable image." the major players in the coffee industry have seen profits decline because of over-crowding of the market (Brains Trust). Only suppliers who can meet Starbucks' coffee standards will be able to supply the giant company." said the author (hoovers. According to the article "Coffee Industry to Adopt New Pricing Plans. If Starbucks can keep a consistent atmosphere that combined with consistent. People like to be seen with them. "With these guidelines. has few companies. a major corporate growth strategy. Score: -2 Bargaining Power of Suppliers Porter's fourth industry force is bargaining power of suppliers. and less focus on quality and brand image. Starbucks needs to stay with its values and ideals that have made it successful. which has a direct impact on the customer's experience and satisfaction. Starbucks announced new coffee purchasing guidelines. This is why image is very important for Starbucks. Efforts to integrate Starbucks into the home have minimized threats of customer bargaining power.com). This is a potential threat to the company. The supply of coffee is affected by weather conditions. reflect this leadership position. Glenn Prickett. Issues and Recommendations Facing Starbucks Corporate Strategic Questions What measures can Starbucks take to ensure that their brand image and reputation for quality is not tarnished while implementing a growth strategy? Starbucks has. they can ensure their brand image and reputation. and has differentiated so that many of their substitute products are part of the company. According to Mary Coulter. This is a potential threat. which creates happy.perfect cup of Starbucks Coffee includes. According to a 1996 Starbucks Case Profile. "Frapuccinos are a kind of badge. Starbucks has offset the potentially high bargaining power of its suppliers by issuing coffee guidelines. there are substitute products. and drink a Pepsi. This is why the highest score was negative three. and in this industry. therefore.com). So an advantage of Starbucks . social conditions. Starbucks' ability to innovate and differentiate has minimized the risk of potential entrants. however. while his friend drinks tea while eating a pastry. Starbucks is taking a leadership role in addressing the environmental and social issues surrounding the global coffee industry. The article "Hot Prospects. generally low. There is a large threat of substitute products in a food and drink industry. Starbucks will offset this threat by paying a premium of up to ten cents per pound of coffee to vendors based on how well their coffee meets Starbucks' standards (starbucks. An over-crowded market will give the coffee suppliers bargaining power. Taza teas. How does Starbucks corporate decision of not franchising affect its business? What would be the advantages and disadvantages of franchising for Starbucks? In general. to their menus. Score: -3 Summary of Scores It is necessary to understand that Starbucks Corporation is the world leader in their industry. As corporations grow there can be a tendency to focus too heavily on increasing output and locations. In 2001. and will continue to have. and the health of coffee trees. and Starbucks has traditionally paid premium prices for its green coffee. There are obviously good substitutes to Starbucks' products. the price of the coffee bean could rise in the future due to lower supply. said. these are alarming threats. Other beverage industries can satisfy the customer's need for a drink. There are no substitute products for the coffee beans Starbucks must buy. there are many good substitute products. executive director of the Center for Environmental Leadership in Business. and will be adding beer to their menus in the future. productive employees with low turnover. Those ideals are a great place for employees to work. developed in partnership with The Center for Environmental Leadership in Business (starbucks. We gave a score of negative three to the threat of substitute products because Starbucks is in a food and drink industry. and paying premium prices for suppliers who can meet these guidelines. Starbucks has created an image. at least $1. and heightened demand. a customer can eat ice cream. of course. environmental concerns. Starbucks has added a line of tea. For the industry. as well as the company's ability to innovate and differentiate. Starbucks depends upon both outside brokers and direct contact with exporters for the supply of green coffee (Bruce). Also a commitment to quality cannot be sacrificed as Starbucks locations will likely double in the next five years. A score of negative two means that Starbucks should be weary of the threats in their specific environment. Starbucks. Starbucks' ingredients! It is clear that Starbucks customers have some bargaining power in the industry. Coffee is the world's second largest traded commodity (Bruce). The quality of coffee sought by Starbucks is very high. The company's size offsets many of the threats of competition. Starbucks has found ways to minimize the threats in each industry force. and minimize its threats. The scores.20 per pound (starbucks. The supplying industry to Starbucks.
. A way they could fight this type of competition is by entering into agreements. It has shown to be successful in every new market penetration. Threats loom from the Starbucks' general and specific environment. books) to make available for the customers. Some tactics include building many locations combined with a heavy marketing campaign to draw customers from Churchill's. and they would gain access to a new market and increase sales while decreasing competition. In addition Starbucks would have less research and development costs because the franchisee would have greater knowledge of the local market in terms of demographics. and local/state/country regulations. It is important to understand this in the Product Development phase they would need to focus solely on making their existing products better. Starbucks could use many tactics to overcome this competition and gain the Springfield market share in the high quality coffee industry. We will demonstrate this opinion by using Springfield. Starbucks needs to be extremely aware of what is going on in the competitive markets. Starbucks plans on opening hundreds of new stores internationally. is that national food servers such as McDonalds and Denny's could create high quality coffee menus. coffee equipment. once Starbucks has penetrated all foreseeable worldwide markets? Starbucks has the potential for finding a new type of growth strategy once the International growth strategy is no longer beneficial. This option would have a chance of harming the companies' brand image and reputation for quality and its coffee drinking atmosphere. and the way it operates. Through acquisition Starbucks would ultimately gain a greater market share.franchising would be to open hundreds of new stores with less risk to the company. McDonalds entered into a coffee agreement with Diedrich Coffee. Starbucks will stay in the same industry. Springfield does not have a Starbucks coffee. and affluence. which include production and operations. and we think that this image will carry through and make certain profitability and increased market share in smaller markets. and location environments. Functional Strategic Questions Starbucks Corporation continues to grow. there is the risk of different stores deleting some of the menu to it's standards. Louis. This also goes along with its growth strategy and history of acquiring its competition. The company could be extra sensitive to changes in customer tastes. Most people from Springfield are very much aware of Starbucks. long-term contracts. as well as continuing to grow in the United States. a population growth of 2. For example. and to move into smaller city markets would be no different. Functional strategies. rather than competitors. For example. and use a Concentration growth strategy. This way their coffee would be sold at these outlets. marketing. store operation. What could Starbucks do to counter-act this? In order to compete against this possible market threat. What will Starbucks do once the International growth strategy has become saturated. Springfield has a population of over 300. and financial/accounting (Coulter). Competitive Strategic Questions The biggest threat to Starbucks right now. In Springfield. How can Starbucks continue to be the world leader in their industry? This large question can be partially answered by answering future functional strategy questions. Starbucks could respond by acquiring Diedrich Coffee. of course. We believe that in this case Starbucks will need to concentrate on its core competency. 1998). By keeping all stores corporately owned Starbucks can control and monitor all location's operations and ensure a high employee and customer relations through consistent management. Another possibility would be for Starbucks to create a subsidiary that specializes in catering to the food service industry. yet it the third largest city in Missouri. geographic. with the food service companies that they are competing against. The company could demonstrate Product Market Diversification through research and development. This way the mothers and fathers could go to Starbucks and get their favorite coffee drink while making their children happy. according to Mary Coulter. which is located in Kansas City and St. high quality coffee products. Another option could be to use Starbucks incredible purchasing power to acquire Churchill's. and the external environment. If they have any chance of stopping the companies from being the innovator. the each store would be run slightly different. that is. If. Despite the high amount of rules and regulations that Starbucks would hypothetically have in place for a franchisee.3% and a workforce of over 180.com. This would. Starbucks has a reputation throughout the United States.000 people. psychographics. some believe. Could Starbucks gain a significant amount of market share by entering the markets of less populated cities in the United States. Starbucks would be forced to compete against Churchills Coffee. which is well established in the area. for example. and picking and choosing what products (music. Missouri as an example. so the two main substrategies would be Product Development. The company plans on opening 500 stores in Europe by 2003 (BBC News Online. are the short term goal-directed decisions and actions of the organization's various functional units. Starbucks must push to be the first mover. Research has shown that industry growth rate is slowing. and make profits in doing so. Starbucks must constantly innovate new products to stay ahead of such competitive tactics. In doing so Starbucks could quickly react to environmental changes and make sure to entice as many people as possible into their stores. contradicting its current strategy of only entering markets with high population and affluence? We believe that Starbucks would gain a considerable amount of market share if it entered into markets with less population. take much top management debate that would be a "last resort" in the case of an extreme competitive threat. According to business4springfield.000 people. The disadvantages of franchising are that Starbucks would give up a certain amount of control over the store. it can do so by being the innovator itself. salvage its brand image and decrease the threat of competition. This would be another way for Starbucks to compete without the risk of damaging its reputation and brand image. Our main point is Starbucks reputation precedes itself. Starbucks could start a line children's fruit drinks and "yummy" milkshakes which would help bring families into the store. and Product-Market Diversification. and has goals of greater international expansion. If Starbucks franchised. and creativity.
and even part-time employees are eligible to receive health-care. Starbucks should differentiate its new products based on their unique features and brand image. The Human Resource Management strategy. and company growth will continue to be a major corporate strategy of Starbucks. and they have had the ability to be the public educator on espresso coffee. What marketing differentiation strategy best fits with Starbucks' goal of expansion? How should Starbucks position their brand in new markets? How can their marketing strategies offset potential environmental threats such as a slowing of the market? Starbucks positions their products based on quality and image. as already shown. and resource. ice creams. uncertainty avoidance. according to Mary Coulter. it will be difficult for Starbucks to differentiate their products on quality alone. an individualistic culture. Rather. Starbuck's Research and Development should emphasize product development. is a goal that all the future functional strategies will work to attain. share common goals. group reward systems. According to magazine article found on Starbucks. individualism. sodas. as Starbucks has a far lesser turnaround than the industry average. The four dimensions are power distance. Geert Hofstede's popular cultural dimensions can be used by Starbucks to develop uniquely tailored Human Resource Management Strategies. Brand image. The investment in training obviously pays off. or the DoubleShot' Espresso beverage. In Asian countries such as China. Should Starbuck's employees continue to be Starbuck's most important asset? Should Starbucks change its HRM style in its international markets? Starbucks' employees. such as believing in the product they sell. and compensation techniques that best fit the country in which they are operating. Product differentiation has proven an excellent defense to threats such as bargaining power of buyers. The Starbucks' experience is what will entice new customers to visit their locations and create customer loyalty. Considering that international markets such as Italy are renowned for high quality coffees. Employees should continue to be Starbucks' most important asset. Tailoring HRM strategies to different cultures is critical to the success of their brand image. and masculinity (Hodgetts). Developing new products will offset potential risks. Combined with its research and development emphasis on product development and being the first mover into a market. and get free coffee! All Starbucks' employees are well trained. The extremely low turnover rate of employee has contributed to the development of Starbucks' image. An advantage of being a first mover into a market. Starbucks created the coffee shop revolution. For example.com. in the United States. participate in the Bean Stock program. foods. Starbucks has differentiated its product lines to include teas. The company has been a first mover into the market with products such as the Starbucks Card. substitute products. it is shown.Starbucks organizational culture is one of innovation and creativity. Starbucks must differentiate their products based firstly on image and secondly on the product itself. if the prices of coffee beans rise dramatically.com). however. and competitive forces by continuing to market based on their highly differentiated products and unique brand image. How should Starbucks locate their operations and layout in new markets? Should Starbucks cannibalize in order to minimize the threats of smaller competitors? . Starbucks must be sensitive to the performance appraisal. Starbucks employees are referred to as partners. Starbucks must position its brand as an experience. etc. and brand image is vital to the future success of the expanding company. An R&D emphasis on product development is often synonymous with company growth.In the face of an uncertain future. Starbucks image will be crucial if the company does not want to become a commodity. Understanding these cultural dimensions can lead Starbucks to the most effective ways to communicate with employees (top-down or bottom-up). Being a first mover of new products into new international markets will be an excellent way for Starbucks to build customer loyalty and uphold its image as an innovative company. should be tailored to the host country's culture. and group recognition is coherent with the culture of the country. what kind of Research and Development emphasis and timing should Starbucks employ in order to facilitate its continuing expansion? Starbucks is ranked as Fortune's #1 most innovative company in the food services industry. is a reputation for being innovative and an industry leader. First impressions will be vital in ensuring repeat customers. Starbucks will be able to combat the threats of bargaining power of buyers. individual reward systems are useful and employed (Hodgetts). who have collectivist cultures. Image will be very important to Starbucks' international marketing strategies. It is critical that Starbucks position their brand for what the brand stands for: an innovative industry leader that produces high quality products. individual reward systems would not motivate employees (Hodgetts). the company's brand is a member of the coming century's top twenty-five brands (starbucks. Starbucks should continue to be a first mover into markets with new products and ideas. For example. Starbucks will be able to use sales from its diverse array of products to soften the blow of reduced coffee sales. and appraise performance. It is critical that Starbucks avoid an ethnocentric disposition of their Human Resource Management techniques.
Retrieved 24 April. Starbucks Corporation. International Development.starbucks.com/MGI.marketguide. Thompson. office buildings. Business Wire. 1999). Starbucks has traditionally taken great care in picking the right locations. If cannibalization occurs. but increasing the risk of cannibalization. Retrieved 18 April.com/annuals.com/business/management/thompson/11e/case/starbucks. Retrieved 22 April.bizjournals.com.com.com. 2002 on the World Wide Web: http://seattle. Starbucks' image is too important an asset in the company's international expansion efforts to let reputation tarnish it.com.hoovers.hoovers.Hoover's Online. Starbucks draws on much smaller population bases. Best Companies to Work For. 2002 on the World Wide Web: http://www. Retreived 20 April. 2002 on the World Wide Web: http://news6. In some cities. .fortune. Business & Company Resource Center. Retrieved 20 April.asp.co. grocery stores. . this could seriously damage their reputation. Having locations in a variety of locations will ensure large market exposure. Varying store sizes also allows Starbucks' to be situated in various settings.com.com. high visibility areas. and Starbucks is forced to close some of its operations. 2002 on the World Wide Web: http://www. Concepts and Cases.com/aboutus/internationaldev. Fortune. Retrieved 21 April. "Starbucks Corp. 2002 on the World Wide Web: http://www. Retrieved 22 April. Hoovers. and Strickland." (April 30. Starbucks Corporation Annual Financials . "Starbucks bags UK coffee shops. Retrieved 20 April.bbc. the average Starbuck's location draws on a population base of 200.com). such as airports.starbucks. and street corners. Retrieved 22 April. Puget Sound Business Journal.bizjournals.com/lists/bestcompanies.mhhe. Retrieved 19 April. 2002 on the World Wide Web: http://seattle.com. 2002 on the World Wide Web: http://www. It is extremely important that Starbucks' international stores reflect a uniqueness in their location and layout. 2002 on the World Wide Web: http://www. Ratio Comparison for SBUX from Multex. In the United States.Chronology" (April 15. flooding the market and reducing the threat of smaller competition.uk/low/english/business. 2002 on the World Wide Web: http://www.com.businesswire. Starbucks Case Study. Starbucks' should continue to locate their operations in high traffic areas. 2002 on the World Wide Web: http://yahoo. The company should continue to take excellent care in picking locations. 1998). high visibility locations.Starbucks' coffee shops are typically clustered in high traffic. 2000.thdo. Sources BBC News Online: Business. 2002). 2002 on the World Wide Web: http://www. Retrieved 20 April. Puget Sound Business Journal.000 (hoovers. Starbucks should not flood new markets to drive out threats of smaller competition. "Albertson's to open Starbucks coffee bar" (November 11.html.
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