Submitted to:

Prof. _____________________

Submitted by:

Apostol, Randy C. jr

Guce, Jonah Alyssa Marice F.

Guevarra, Abbygail B.

Reyes, Jackie lou S.

H08202
Date started: June 25, 2010 Date finished: July 2, 2010

Organization studied: Starbucks Coffee

Rationality:

we chose this company because we’re curious on how the people still choose
Starbucks even though the price is not that reasonable, is it because the coffee
taste really good or it’s just the popularity of the coffee shop.

Organization’s Vision-Mission/Role:

Our mission is to inspire and nurture the human spirit- one person, one cup,
and one neighborhood at a time.

Analysis where the organization is in right now:

Brief Starbucks story:

We began in 1971. Back then we were a roaster and retailer of whole bean
and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market.

Starbucks is named after the first mate in Herman Melville’s Moby Dick. Our
logo is also inspired by the sea – featuring a twin-tailed siren from Greek mythology.

Being a Responsible Company

We are committed to doing business responsibly and conducting ourselves in
ways that earn the trust and respect of our customers, partners and neighbors. We
call this Starbucks™ Shared Planet™ – our commitment to doing business
responsibly. Within this, we have identified three areas of focus: ethical sourcing,
environmental stewardship and community involvement.
Starbucks competes in the Service Sector, Specialty Eateries Industry and is the
dominant player in the Gourmet Coffee segment. Starbucks has committed itself to
a philosophy of Corporate Social Responsibility. This philosophy has led the
company to develop ethical and environmental guidelines for the sourcing of its
coffee beans.
Economic factors:

During 2008 and 2009, Starbucks closed over 900 stores in the United States
and quite a few overseas. Starbucks expects to generate free cash flow of around
$1 billion for the fiscal year ending in September. The price to earnings ratio of
Starbucks is 26.79, a high P/E suggest that investors are expecting higher earnings
growth in the future compared to companies with a lower P/E. the return on
investment of Starbucks is better that the industry rate of 3.7. The return on equity
is also is great when compared to the industry rate of 7.65.

CLIENTS:

The Starbucks welcomes millions of customers every day, in more than

16,000 locations in over 50 countries. The company doesn’t need any
advertisements anymore because a lot of people really enjoy the coffee.

Their costumers belongs to the upper middle class to high class people
because even though the price of their coffee is expensive, they still afford to buy it.

Way of operations:

SB coffee considers their employees as their partners, offering the finest

coffees in the world, grown, prepared and served by their finest people. Their
employees were trained very well. They were committed to coffee knowledge,
product expertise and customer service.

Profitability
These ratios measure how efficiently the company uses its resources. Higher profitability could
be attributed to greater efficiency. The gross profit margin, Indicates how efficiently a company manages
its largest assets and biggest costs. From a gross profit standpoint, we like what is going on at Starbucks
because from a 19.19% in 2008 it was able to recover to 20.71% for 2009.

Liquidity Ratios

Liquidity ratios indicate how well positioned a firm is to meet any future short-term obligations.
Liquid assets include cash, marketable securities, and accounts receivables, among others. The current
ratio of Starbucks for 2009 is 1.29, under the rule of thumb the current ratio should be 2.0. In 2008, the
current ratio was 0.8 so Starbucks became more liquid in 2009. The quick ratio of Starbucks also
improved from .3 to .59 in 2009, this is a good sign for the company. The quick ratio measures the
company’s ability to pay off short-term creditors without relying on the sale of inventories. The working
capital increased from -441.7 to 454.8 in 2009.

Return on Investment

The following two ratios show what kind of return the company is getting on its investments.
They are two crucial measures of how the company is performing. We like what we see here for
Starbucks. The return on assets of Starbucks increased from 5.56% in 2008 to 7.01% in 2009. This means
that Starbucks is starting to recover from an economic downturn in 2008.

Starbucks’ competitor:

Figaro coffee is a Filipino chain of coffee shops. It is a designed as European-

style cafés catering to the discerning, upscale coffee lovers, offering coffees,
roasted and brewed according to the traditions and high standards of French and
Italian cafes. Figaro offers a selection of specialty coffees from around the world as
well as a variety of coffee and tea paraphernalia.

SWOT ANALYSIS:

Strength

• Starbucks Corporation is a very profitable organization, earning in

excess of $600 million in 2004. The company generated revenue of
more that $5000 million in the same year.

• Starbucks has long-term growth prospects based on the company’s

dominant leadership position, powerful brand, strong consumer
acceptance, experienced management team and global expansion
opportunities.

• Product diversification, Company operated retail stores, International

stores (no franchise)

• Good relationships with suppliers, Industry market leader, Globalized,

Customer base loyalty

• Product is the last socially accepted addiction, widespread and

consistent, Strong Board, Strong financial foundation.

Weakness
 • Starbucks has a reputation for new product development and
creativity. However, they remain vulnerable to the possibility that their
innovation may falter over time.

• The organization has a strong presence in the United States of

America with more than three quarters of their cafes located in the
home market. It is often argued that they need to look for a portfolio of
countries, in order to spread business risk.

• The organization is dependent on a main competitive advantage, the

retail of coffee. This could make them slow to diversify into other
sectors should the need arise.

• Ever increasing number of competitors in a growing market, Self

cannibalization Cross functional management, Product pricing
(expensive), Lack if internal focus (too much focus on expansion).

Opportunities

• New products and services that can be retailed in their cafes, such as
Fair Trade products.

• The company has the opportunity to expand its global operations. New
markets for coffee such as India and the Pacific Rim nations are
beginning to emerge.

• Co-branding with other manufacturers of food and drink, and brand

franchising to manufacturers of other goods and services both have
potential. Expansion into retail operations, Technological advances.

• New distribution channels (delivery), new products, Distribution

agreements, Brand extension, emerging international markets,
continued domestic expansion/domination of segment.

Threats

• Starbucks are exposed to rises in the cost of coffee and dairy products.

• Since its conception in the Pike Place Market, Seattle in 1971,

Starbucks’ success has lead to the market entry of many competitors
and copy cat brands the pose potential threats.
 • Competition (restaurants, street carts, supermarkets, other coffee
shops, other caffeine based products)

• Fragile state of worldwide production of specialty coffees, Alienation of

younger, Domestic market segments, Corporate behemoth image

• Low barriers to entry, competition fierce. As SBUX expands

internationally, it faces the challenge to build brand awareness in new
markets.

• Cultural and Political issues in foreign countries

Organization’s new goals, mission, objectives etc…

(Based on the group’s business analysis):

The company will surely continue providing the best product. We will not
destroy the customers’ expectation about the product. We’ll give the best coffee
you’ll never forget your whole life.

Primary set of actions to be taken:

1. Maintain the good quality of the product

2. Maintain the consistency of the price

3. Enhance the flavors of the old products so that the customers will continue to
purchase and be able to produce new palatable products that will satisfy the
needs of the customers.

4. We will make sure that our company has a big difference to other companies
in terms of taste of the coffee and with our other products.

5. If we open new branches to the other places, we’ll make sure that the place
is appropriate for our coffee shop.