Starbucks Corporation

Resources

- A higher level of efficient and competent human resources, including management and

employee productivity. Starbucks management has the power to make prudent decisions.

- Unique styled shops, strategically placed locations in high traffic areas. Starbucks has

more than 25,000 stores located in 75 different countries, creating billions in annual

revenue, which rightly makes it one of the largest companies in the world.

- Starbucks has strong financial health, which contributes to employee benefits and

educational development. In 2016, Starbucks had $2.26 billion in cash and short-term

investments (MGMT, p. 137).

Capabilities

- Starbucks offers premium coffee products, uniquely designed, and satisfying to its

esteemed customers. Employees always serve with customer satisfaction in mind.

- Has the capability to offer loyal customers incentives rewards through technology, i.e.,

apps and social media (Facebook and Twitter).

- Capability to manage and operate shops outside of the U.S., with the ability to enter

foreign markets ahead of competitors, and better suited international cultural settings

- Has the ability to create a new format of coffee shop unique to any market.

- Unique styled shops, strategically placed locations in high traffic areas, giving Starbucks

a more extensive customer base.

Core Competencies
 - Distinct identity, branding, and marketing, Starbucks is different from any other brand

trying to compete with it

- Established the "Third Place," a campaign that has enabled Starbucks to create a

perceived-valued atmosphere, providing people with a place to go between work and

home. Employees offer quality knowledge of service and superior customer service.

- A diverse, highly motivated workforce that is readily available to provide high-quality

customized service to customers.

- An optimized mix of owned and franchised shops and choosing of sophisticated location

strategies for higher leverage

Business Strategy

Business strategies and are critical to the success of a company. Starbucks' core business

strategy is quality; it's a premium brand that sells and offers only premium quality products.

Starbucks has cultivated a loyal following of customers who reward it with repeat business

(Rothaermel, p. 202).

Differentiation strategy, a generic business strategy that seeks to create higher value for

customers than the value that competitors create, while containing costs (Rothaermel, p. 187).

Starbucks has built a strong differentiated appeal by providing superior quality beverages and

other food items combined with high-quality customer experience, and a global presence

reducing the threat of competitor substitutes. Starbucks focuses on differentiation strategy by

creating products that aim at selling expensive quality coffee with characteristics, which attract

customers.

It offers differentiators such as premium product mixes, locations, coffee beverages

reputation, and excellent customer service that translated to its superior valued brand, which is
costly for competitors who try to imitate. Customers pay for the unique experience and

ambiance that only Starbucks provides, not just the cup of coffee. An essential element of

Starbucks's "third place" status is that each store is welcoming and comfortable (MGMT, p. 125).

They are strategically placed locations in high traffic areas, i.e., college campuses, hotels, and

airports, targeting college students, people traveling, and military.

Starbucks also uses a product diversification strategy. Product diversification strategy, a

corporate strategy in which a firm is active in several different product markets (Rothaermel, p.

287). Starbucks products include tea and other beverages and a variety of fresh food items by

making some key acquisitions such as Teavana, Tazo, Evolution Fresh, La Boulange, and Ethos,

showing its use of product diversification strategy (MGMT, p. 127).

International strategies have also been crucial for Starbucks; its brand is one of the most

influential global brands in the world. Expanding globally into key developed and emerging

markets to geographically diversify, has been highly successful for Starbucks with operations in

75 different countries, creating billions in annual revenue. All these strategies have given

Starbucks a competitive advantage over its competitors.

Four Findings of Facts

Management

Starbucks' mission – "To inspire and nurture the human spirit – one person, one cup and

one neighborhood at a time" (Mission Statement, 2020). Starbuck's mission statement outlines
their drive to remain leaders in the coffeehouse industry. The institutional framework of a

company influences management, its message, transition and other factors which can be

hazardous to business performance, Starbucks has a business-friendly organizational framework.

The organizational structure thrives on enabling Starbucks to continuously improve the processes

and quality of its products and services. Management influenced decision-making for

supervisors, Starbucks has delegated power, there is plenty of diversity amongst employees,

managers and consumers creating a unique "Starbucks Experience" at each shop, based on the

understanding of its targeted market. Therefore, as Starbucks expands and evolves further, its

community and employees behave in a flexible and versatile manner.

As Starbucks venture into new markets, having an established strong marketing presence

online and maintained principles, management will need to come up with innovative ways to

reach its consumers. Management teams need to have the freedom to operate within their overall

framework, tailoring the store format, i.e., its menu, introduce local product mixes and price

point needs, lifestyles, and the individual taste of each market or community. Human capital

management translates into customer satisfaction due to the providing of excellent customer

service.

Marketing

Starbucks has a marketing strategy the is unique, which perfectly matches the concept

they want to portray. The perfect cup of coffee, which emphasis is product quality, even though

prices are slightly higher than expected, customers are highly satisfied with its rich, delicious

taste and aroma. It established the "Third Place," campaign which enabled Starbucks to create a

perceived-valued atmosphere, providing people with a place to go between work and home.
Customer satisfaction, customers are attracted to the services of Starbucks employees because

they have quality knowledge of products and offer superior customer service.

Starbucks has expanded to create a community around its brand, by encouraging

customers/employees to express their experiences, they actively strive to join community

discussions. Making smart partnership decisions demonstrates that Starbucks offers another way

to grow its business through innovation and brand marketing. One of the first to provide internet

capabilities in their store and offering order ahead online options to allow for speedy pick-up.

Starbucks' marketing is focused on "word-of-mouth" advertising, letting its high-quality products

and services speak for themselves.

Starbucks also pushes the use of technology to engage with customers more intimately by

utilizing social media outlets like Facebook and Twitter to communicate with customers in real-

time. Starbucks' highly successful loyalty program has over 10 million regular users (MGMT, p.

125 – 126). Global brand recognition is what Starbucks has successfully achieved. Continuing

the trend of improving customer relations will provide marketing strategies to grow globally,

promoting positive reviews and conversations amongst loyal and new customers.

Finance and Accounting

Starbucks' revenues have been continually increasing since 2011 from about $13.5 billion

to approx. $21 billion in 2016 (MGMT, p. 136). According to the data, growth has begun to

slow in the United States market as the company faces challenges of oversaturation. Net Sales

only grew by 11.23%, 19.16 billion in 2015 to $21.32 billion in 2016, compared to a 16.5%

growth in 2014 $16.45 billion to in 2015 $19.16 billion. From 2015 to 2016, Starbucks opened

an additional net 804 stores in the Americas, increasing the total number of stores from 14,803 to

15,607 (MGMT, p. 133). With over 15,607 shops across the United States and the challenge of
oversaturation, Starbucks' growth strategy should focus on expanding into untapped rural

markets and abroad to continue growth and diversify its product line in America.

Earnings Per Share (EPS) has not been consistent since 2012, with values ranging from

1.79 in 2012, 0.01 in 2013, 2.71 in 2014, 1.82 in 2015, and to 1.90 in 2016. In 2013, the low

value in EPS can be attributed to the net income of $8.3 million; the net income value jumped to

$2.07 billion in 2014 and consistently increased to $2.8 billion in 2016. With the net income

increasing and outstanding shares and preferred dividends held constant, EPS should have risen

from the 2.71 high in 2014. There were no drastic drops in the normalized appreciation

percentage of the stock price, assuming Starbucks provided preferred stock dividends, which

explains the appreciation of the stock price.

Starbucks' financials look healthy and stable with growth in receivables, current assets,

sales, and net income. To experience continual growth into the future, Starbucks must not rely

heavily on the U.S. market segment since the market is saturated. Continue pushing forward in

their efforts with global market expansion, gradually building profit drivers in several countries

in an organic way.

Business Ethics

In their own words, "Our focus is on ethically sourcing high-quality coffee, reducing our

environmental impacts and contributing positively to communities around the world (MGMT, p.

126)." Starbucks is social responsibility is a fundamental concept, aims at collaborating with all

its suppliers socially, giving its farmers (coffee-producers) a reasonable value for the beans they

labour to grow. For example, in accordance with its social responsibility and sustainability goal,

Starbucks established Coffee and Farmer Equity (C.A.F.E.) practices, which "help farmers grow

coffee in a way that's better for both people and the planet (MGMT, p. 129). They are
environmentally conscious, preferring to utilize environmentally friendly solutions whenever

possible.

In 2008, C.E.O. Howard Schultz revamped the organizational framework of Starbucks to

bring customer service to the forefront. New regional divisions were formed for better

implementation of training methods to increase customer engagement. Starbucks follows a

strong corporate and ethical governance policies in which workers are regarded as equal rights

partners. By implementing all laws, Starbucks identifies diversity, corporate governance rules,

fair trade practices, fair competition laws, intellectual property rights laws, and confidential

knowledge, as its ethical framework.

As in 2008, Starbucks partnered with (R.E.D.) in raising awareness and funds to fight

HIV/AIDS in Africa, has since contributed over $13 million (MGMT, p. 126). Additionally,

Starbucks worked with community-development financial institutions to launch the Create Jobs

for U.S.A. program, which collects donations from customers, employees, and others to increase

available funds for community business lending (MGMT, p. 127). Starbucks has taken on some

controversial issues and taking a stand, such as publicly endorsing same-sex marriages, open

carry of weapons in public places, hiring in low-income communities, and committed to hiring

veterans and their spouses.

Starbucks has made some excellent ethical strides, but some question their moral

judgment at times. Starbucks can continuously improve ethics by continuing to stay committed

to the community, environment, and diversity, openly displaying a commitment to being socially

responsible and ensuring their business ethics and compliance is in support of their mission and

protecting their culture and reputation.

 Work Cited

MGMT. [Columbia College].

"Mission Statement." Starbucks Coffee Company, www.starbucks.com/about-

us/company-information/mission-statement.

Rothaermel, Frank. Strategic Management: Concepts. 4th ed, New York: McGraw-Hill,

2018.  eText