Professional Documents
Culture Documents
Lisa Ricard
4/28/17
TABLE OF CONTENTS
EXECUTIVE SUMMARY 5
EXISTING MISSION 5
SWOT ANALYSIS 10
STRENGTH 11
WEAKNESS 11
OPPORTUNITIES 12
THREATS 12
THREAT OF SUBSTITUTION 15
INDUSTRY RIVALRY 16
CONFRONTATION MATRIX 16
IMPACT/PROBABILITY MATRIX 17
POSITIONING MAP 18
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EFE MATRIX 19
IFE MATRIX 20
IE MATRIX 21
SFAS MATRIX 22
MARKETING 23
OPERATION 25
MANAGEMENT 25
BCG MATRIX 27
GE/MCKINSEY MATRIX 28
SPACE MATRIX 31
QSPM MATRIX 34
LIQUIDITY RATIOS 36
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LEVERAGE RATIOS 36
ACTIVITY RATIOS 36
PROFITABILITY RATIOS 37
GROWTH RATIOS 37
INCOME STATEMENT 38
BALANCE SHEET 39
CASH FLOW 41
WORK CITED 42
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Executive Summary
Starbucks Coffee can be considered one of the largest coffee companies in the coffee
industry. By occupying almost half of the market share, Starbucks Coffee has made a name for
themselves. Along with the Starbuck Coffee Brand, Starbucks Coffee owns, Seattle’s Best
Coffee, Teavana, Tazo, Evolution Fresh, La Boulange, Ethos Water and Torrefazione Italia
Coffee (Starbucks Company Profile, 2017). This report analyzes the strategic methods Starbucks
Coffee currently is involved in. Then these strategies are analyzed through various strategic
matrixes designed to identify new strategic strategies for the company to peruse. The matrixes
Matrix, Positioning Map, EFE and IFE Matrix, IE Matrix, GE/McKinsey Matrix, Industry Life
Cycle, SPACE Matrix, Grand Strategies Matrix, and the QSPM Matrix. Through the combined
matrixes it can be concluded Starbucks Coffee holds an excellent strategic position, but there can
be room to improve upon. Through various investment such as market penetration and product
diversification Starbucks Coffee can still claim new profits in an industry that is reaching its
maturity.
Existing Mission
Starbucks Coffee was started in 1971 as a roaster and retailer of whole beans, ground
coffee, teas and spices in a small store in Seattle’s Pike Place Market (Starbucks Company
Profile, 2017). They were named after the first mate in Herman Melville’s Moby Dick and their
logo is inspired by the sea siren from Greek mythology. Now Starbucks Coffee has a customer
base of over a million who come every day to purchase quality coffee. As of January 1, 2017,
Starbucks Coffee has opened over 25,734 doors inviting their guest to enjoy a delicious beverage
or baked good. Starbucks Coffee buys their coffee beans from coffee farms in Latin American,
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Africa and Asia where their special buyers will select high quality beans. Then the master
roasters bring out the balance and rich flavor of the beans through the signature Starbucks Roast.
In 1992, Starbucks went public and was listed on the NASDAQ under the ticker SBUX
(Starbucks Company Profile, 2017). They offered their common stocks at $17 per share. By the
close of the first trading day, the stock’s value rose to $21.50 per share. Starbucks Coffee
believes in the importance of a company that can balance between profitability and a social
conscience. The company achieves this through their practices of ethical sourcing, community
purchasing, supporting farmer loans and forest conservation programs. This ensures a better
future for the farmers and a more stable climate for the plants. It also creates a long-term supply
of the high-quality bean that has been used for over 40 years.
Currently Starbucks has a range of products that can be used in stores, at home, or on the
go. Starbucks Coffee famously sells more than 30 blends of coffee and even has single-origin
premium coffees (Starbucks Company Profile, 2017). They sell handcrafted beverages, which
include espresso beverages, Frappuccino’s, but also smoothies, teas and refreshers. Additionally,
they sell merchandise such as coffee and tea brewing equipment, Verismo Systems by Starbucks,
mugs and more. Guest can also enjoy fresh food such as baked pastries, sandwiches, salads,
When Starbucks Coffee started off fiscal 2016, it was on a strong note (Forebes, 2016).
All stores experienced sales growth and future plans for the Asian market were developed. For
the rest of 2016 and on to 2017 Starbucks Coffee will objectively focus on growing the number
of stores, elevating the coffee experience, creating new customer occasions, driving at home
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coffee share & occasions, building up the Teavanna brand, extending the digital engagement, and
Starbucks Coffee plans on changing their in store mix along with expanding their brand
(Frobes, 2016). Traditional stores focus on the in store experience, but recently Starbucks Coffee
has begun opening more drive-thrus in the outer edges of urban and suburban areas.
Additionally, Starbucks Coffee has developed a few express stores. The aim of this strategy is to
increase the company’s store penetration by 5%. The coffee market is expected to see a mini
decline due to the industry being in its maturity phase. Because of this Starbucks Coffee wants to
ensure and position themselves as the most preferred coffee shop. Starbucks Coffee intends to
expand their stores portfolio by offering a highly customized and elevated experience. The
objective of this strategy is to develop independent stores that will offer a different coffee
making style. This includes opening four new types of stores which differs in the type of coffee
produced, the layout of the store, and even the food served. Starbucks Coffee hopes to address
the issue of competition and ubiquity by delivering their customers the highest quality coffee.
For Starbucks Coffee, their lunch hours have been their most profitable part of their day
for years (Forbes, 2016). This is due to the inclusion of improved food offerings, more fresh food
items with the bistro boxes and sandwiches, and their strength in the tea platform. Starbucks
Coffee intends to offer new and innovate food and beverage options to drive customers in. With
the objective of driving the demand for at-home coffee, Starbucks Coffee must grow their
consumer product goods department. By partnering with companies like Pepsi in Latin America,
Tingyi in China, and Anheuser-Bush, Starbucks plans to expand their ready to drink segment.
This segment is forecasted to grow approximately 10% in the next five years. This strategy
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should allow Starbucks Coffee to claim an additional market share of $1 billion in the premium
RTD category.
Tevana has become one of Starbucks Coffees biggest drivers of sales (Forbes, 2016).
Tevana has contributed about one percent point in comparable sales growth for seven
consecutive quarters. This success has lead Starbucks Coffee to bring the Tevana brand into
China and Europe. Since China is one of the largest tea consuming countries they hope this
expansion will give the brand a boost. In the US, mobile payments comprised of one-fourths of
all of Starbucks transactions. The company’s most recent objective is to drive digital engagement
through their Mobile Go and Pay equivalents 20% of all mobile transactions. Their objective to
create a truly seamless, digital experience seems be successful. Lastly, Starbucks Coffee wishes
to establish new partnerships. Their food sales now make up 20% of their revenue. To fully gain
off the popularity of these complementary goods, Starbucks Coffee wishes to work towards
establishing partnerships by making food one of their major growth drivers. They are currently
testing stores in the western U.S to see if weekend brunch menus would be profitable. Starbucks
Coffee has partnered with Italian bakery, Princi and Macy’s to start testing these menu items.
Starbucks Coffee believes within the next five years this strategy could help generate 25% of
Starbucks Coffee created a mission statement that reflects their view on leadership within
the coffeehouse industry (Gregory, 2017). Currently Starbucks Coffee’s website host their most
current mission statement which is “To inspire and nurture the human spirit- one person, one
cup and one neighborhood at a time.” Starbuck coffee inspires and nurtures the human spirit
through their employees. The company has maintained a small company culture where
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relationship and warmth are believed and built upon. The customers also experience this
inspiration and nurturing through their small company culture. Starbucks baristas and customers
use their first name to help develop a warm relationship. Additionally, the stores are designed to
feel warm and cozy hoping to inspire and nurture meaningful and warm relationships.
Their mission statement also indicates a personal approach through their one person, one
cup, and one neighbor at a time section (Gregory, 2017). Starbucks Coffee hopes to have a
meaning impact on every employee that works for them along with every customer that shops
with them. This mission will allow them to continually and gradually grow their business
basic organizational structures (Meyer, 2017). The organizational structures are broken down
into functional structure, geographic divisions, product-based divisions, and teams. The
functional structure is grouped based on their business functions. The HR department, finance
department, and marketing department are located at their corporate headquarters. They will
issue policies and activates that are applicable and implemented through all their stores. This
At the current moment the company has three regional divisions for their global market,
China and Asia-Pacific, Americas, and Europe, Middle East, Russia and Africa (Meyer, 2017).
Within the United States the geographic divisions are broken up further to include Western,
Northwest, Southeast, and Northeast. For the geographical structure each division has a senior
vice present. Each store manager has to report then to two supervisors, the geographic head and
the functional head. This was developed in hopes of providing geographic support for geographic
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needs. Product-based division splits up the structure into three products, coffee and related
products, baked goods, and merchandise. This allows the team to focus on a certain product line.
Lastly, the teams structure is designed more for each individual store. The company has the
teams organized to deliver their goods and services to the customers. This allows them to provide
SWOT Analysis
The SWOT analysis is one of the most basic yet important tools used to analyze a firms
and industry (Kipley & Jewe, 2014). The acronym SWOT stands for strength, weakness,
opportunities, and threats. The strength and weaknesses focuses on an internal assessment of the
functional areas of the firm including management and culture. Opportunities and threats focuses
on the external environment. With opportunities and threats this look at the macro or competitive
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technological, economic, and global. The strength and weaknesses are assessed based on
competition versus opportunities and threats where these factors are completely out of the firms
control.
Strength
Starbucks Coffee Company is a well-established and well branded name. There top three
strength included strong brand image, operating efficiency and strong growth leading to superior
financial performance, and strong customer loyalty. These factors are considered their strongest
strengths because it allows them the ability to drive a higher margin on their profit. Their strong
brand image brings their customers to their place while their operating efficiency allows them to
gain a profit on their product margin. Customers are coming to Starbucks Coffee for a
Weakness
With any company, Starbucks has a few issues with their production that could be driving
guest away or could be causing potential guest to shop alternatives. There top three weaknesses
include being highly dependent upon one product, dependent upon the American segment, and
their higher price points. Being highly dependent upon coffee beans could be detrimental in
many scenarios. If an embargo is placed on coffee beans, the cost of coffee beans rises or an
environmental disaster occurs and coffee beans production is decreased, Starbucks main stream
of revenue is cut drastically. Being dependent on the American segment is a weakness since
Americans go through phases and trends. Additionally, by not being heavily invested in other
countries Starbucks Coffee is missing money from potential sales. Lastly, higher price points
might drive away customers who just want a cheap coffee and don’t care about the quality.
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Ultimately Starbucks Coffee hopes to overcome these weaknesses through their combined
Opportunities
There are many potential strategies Starbucks Coffee can explore to bring more revenue
to their company. The top three opportunities identified is expansion in Asia, the Middle East,
and Africa, diversification of product mix, and vertical integration. As stated in their weaknesses,
Starbucks is heavily dependent upon America. Since Starbucks Coffee already is in operation in
these places the risk with any foreign market is sustainably lowered and they would be rewarded
with new sales. By diversifying their product mix, Starbucks Coffee would not need to be
heavily dependent upon the coffee bean and could survive any unforeseen circumstances. Lastly,
with vertical integration Starbucks Coffee could ensure quality products and save costs when
purchasing their beans since they would be growing it themselves. These are some potential
opportunities to solve some issues they are currently facing in their weakness.
Threats
The threats Starbucks Coffee is facing are the most important to identify since these are
factors they have no ability to control. The top three threats identified are competition from low-
cost coffee sellers, the independent coffee house movement, and rising cost of the coffee bean.
Low-cost sellers are a threat since there is no switching cost for buyers in this industry. Buyers
who simply want a cheap coffee at a cheap price will go to the low-cost sellers rather than
spending more money since the opportunity cost is beneficial for them. The independent coffee
house movement is a trend with millennial who prefer to go to quality coffee houses instead of
fast coffee stores. Starbucks Coffee in a sense is too “mainstream” and popular which makes
these independent coffee houses more appealing. Lastly, the biggest issue is the current rising
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cost of the coffee bean. As stated in weaknesses and opportunity, the rising cost of coffee beans
is bad for Starbucks Coffee since their so heavily dependent upon it. These rising cost will either
force Starbucks Coffee to raise their prices or will cut into their margin. Threats are the most
distressing factor since a company could be doing everything right, yet these factors could still
In 1980, Dr. Michael E. Porter developed a tool for companies to analyze their
organization’s industry structure through strategic decision-making (Kipley & Jewe, 2014). This
model was named the Five Competitive Forces Model and was published in his book,
Competitive Strategy: Techniques for Analyzing Industries and Competitors. With this model,
Porter has industries identifying their industry structure and the way their company can change to
best meet the opportunities and threats in their external environment. With this information a
company can determine the intensity of competition within their industry and then can determine
The five key competitive forces Porter identifies is bargaining power of suppliers,
bargaining powers of buyers, threat of new entrants, threat of substitutes, and industry rivalry
(Kipley & Jewe, 2014). Starbucks Coffee Company belongs in the coffee industry which has a
couple of power player already in play, not including the new small coffee house movement
America is facing (Greenspan, 2017). To ensure Starbucks Coffee stays on top, they must be
successful on their effectiveness in addressing the negative impacts of the five forces of its
industry’s environment. When completing a Five Force analysis checklist, it can be determined
that Starbucks Coffees have varying intensities or strengths based on their position as follows:
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Bargaining Power of Buyers is a strong force
With bargaining power of suppliers, this looks at the position the seller has over the
buyer. In other words, does the company’s supplier have a control over the price of the supply
(Kipley & Jewe, 2014)? Due to the size of product Starbucks Coffee Company purchases, the
suppliers power is lessened since they are too valuable of a customer to lose (Greenspan, 2017).
With Starbucks Coffee, their external factors of consideration include a high variety of suppliers,
a large overall supply, and a moderate size of individual suppliers. Additionally, Starbucks
Coffee has a policy for diversifying its supply chain which helps reduce the influence of
suppliers on the business. Because of this Starbucks Coffee does not need to focus their attention
on their suppliers.
Similar to bargaining power of suppliers, the bargaining power of buyers looks at how
much the customers can impose pressure on the company’s margins and volumes (Kipley &
Jewe, 2014). With Starbucks Coffee in particular, their external contributing factors include low
switching cost, substitute availability, and small size of individual buyers (Greenspan, 2017).
The bargaining power of buyers is one of the most significant forces affecting Starbucks
Coffee’s business. With the increase independent coffeehouse movement and cheaper coffee
house alternatives, customers can avoid going to Starbucks. Substitutes such as at home instant
beverages and drinks from restaurants such as McDonalds proves to be important factor for
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Starbucks Coffee. Because of this, bargaining power of customers should be one of the top-
With the coffee industry, the risk from a new entrant is moderate. The force, threat of
new entrants, looks at the competition within industry by how easy it is for other competitors and
companies to enter the industry (Kipley & Jewe, 2014). When another companies enters an
industry this can raise the level of competition and market environment thus reducing its
attractiveness. When looking at Starbucks Coffees external factors, the ones that determine this
risk is the moderate cost of doing business, moderate supply chain cost, and high cost of brand
development (Greenspan, 2017). For Starbucks Coffee, the new entrants have a significant, but
not strong effect on business. With new entrants they can compete against Starbucks Coffee with
their moderate cost of business and supply chain development. However, these new entrants will
find it difficult to compete with establish brands because of the costly nature of developing a
strong brand. Because of this the threat of new entrants is moderate this should be a secondary
Threat of Substitution
When there are alternative products with lower prices being offered, a threat of
substitution exists (Kipley & Jewe, 2014). The external factors that are currently affecting
Starbucks Coffee is the availability of substitutes, low switching cost, and low cost substitutes
(Greenspan, 2017). With these substitutions, it could attract a portion of Starbucks Coffee market
share and reduce their potential sales volume. With Starbucks Coffee substitution, the substitute
good could be another company, but it could teas and sodas which could be sold outside of the
coffee industry. There is no switching cost for these goods and these substitutes can cost less
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than Starbucks products. All these issues combined has made the threat of substitutes a top-
priority concern.
Industry Rivalry
With industry rivalry, this force focuses on the intensity of competition between existing
companies within the industry (Kipley & Jewe, 2014). With a high competitive pressure, this
results in pressure on companies’ prices, margins, and profitability for everyone in the industry.
The external factors that contribute to Starbucks Coffees are large number of firms, low
switching cost, and variety of firms. Starbucks Coffee faces a large number of competitors who
have different sizes, specialties and strategies. With a strong competition and low cost of
Confrontation Matrix
O1 O2 O5 O8 T1 T3 T4 T6
S1 2 3 1 1 3 1
Strength S4 1 3 2
S6 1 3 2 3 2
S7 1 1 2 2 3
W1 3 1 1 3
Weakness W2 3 1
W4 1 3 3 2
W6 2 1 1 1 2 3
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The Confrontation Matrix is a tool that a company can use to held further analyze each
different combination of the SWOT analysis (Kipley & Jewe, 2014). By using a ranking of 0 to
3, all the squares identified with a 3 are the combinations identified as strategically important or
interesting. Looking at Starbucks Coffees matrix, position O2-S1 was marked as being
strategically important. This means that with the opportunity of product diversification and the
strength strong brand image, Starbucks Coffee should be looking into this strategically. With a
strong brand image many customers will be willing to try new products just because they believe
Impact/Probability Matrix
The Impact/Probability Matrix uses the opportunities and threats from the SWOT
analysis to chart potential risk the company can face (Kipley & Jewe, 2014). On the X axis, the
opportunity or threat is placed based on its probability risk, which is risk that an event may
occur. In other words, this is the probability of this event actually occurring. The Y axis is where
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the impact risk for the opportunity or threat is placed. This is based on the size of the impact in
terms of cost and impact on the company or other critical factors. For Starbucks Coffee, the
rising price of coffee beans has a high impact/probability due to the nature of how Starbucks
Coffee uses their bean. Since this threat is currently occurring, this event is placed high on the
probability side. Additionally, the impact of this event is big to the company so it too is placed
Positioning Map
The Positioning Matrix is a graphical representation of where a company is and where its
main competitors are within a marketplace (Kipley & Jewe, 2014). This is done by comparing a
company based on their price and quality. When developing this matrix, a medium or grande
sized regular cup of coffee was used to compare the stores. Peet’s coffee has the highest price
point but due to the nature and quality of their product they earned the highest spot. Starbucks
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Coffee does have a high quality product, but their prices are more affordable. McDoanld’s
McCafe on the other hand had the lowest price point but there is no quality to their coffee.
EFE Matrix
The External Factors Evaluation (EFE) is another strategic tool which uses the
opportunities and threats from the SWOT to evaluate the external environment of the firm
(Kipley & Jewe, 2014). In the ratings column, these numbers represent the response of the
company towards the particular threat. This is based on a 1 to 4 scale with 2.5 being average.
The weighted column is how the company believes how well of a job they are at responding to
the existing opportunity and threats in its industry. The higher the companies EFE score is, the
better their current strategies are at capitalizing on their opportunities and avoiding external
threats. With Starbucks Coffee’s EFE score of 2.45 they are doing an average job of this.
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IFE Matrix
The Internal Factors Evaluation (IFE) matrix is similar to the EFE matrix, but focuses on
the internal factors instead of external. (Kipley & Jewe, 2014). This matrix is used to identify
and evaluate the major strength and weaknesses by assessing their relationship in the functional
areas of a business. By adding this along with the EFE Matrix, a company can evaluate how a
company is performing in relation to its competition. The IFE Matrix is set up identical to the
EFE Matrix but instead of using opportunity and threats, the strength and weakness are used
since this is what is being evaluated. For the total weighted scores, if a company falls below 2.5
than this show the company is weak internally. Companies who scores significantly above 2.5
indicate a strong internal position. Starbuck Coffees earned a 2.61 which is just above the
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IE Matrix
The Internal/External Matrix (IE) takes the EFE and IFE Matrix and combines them to
conceptualize the results of the two (Kipley & Jewe, 2014). The IE Matrix plots the results from
the EFE and IFE and where the company falls suggests a potential strategic strategy the company
should follow. Taking the weighted totals from both the EFE and IFE, a score of 1.0 to 1.99
represent weak positions, 2.0 to 2.99 represents an average position, and a score of 3.0 to 4.0 is
strong. Starbucks Coffee combined score places them in box 5. This means they are doing an
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SFAS Matrix
The Strategic Factor Analysis Summary (SFAS) is a combination of the most important
factors identified from External Factors Evaluation and the Internal Factors Evaluation (Kipley
& Jewe, 2014). This SFAS Matrix gives an overall strategic position of the company from the
combined strengths, weaknesses, opportunities, and threats. This matrix allows the company to
condense these factors and reflect on the priority of each. After they can identify their biggest
priorities, but also it allows the company to reflect on the duration time for their project. For
Starbucks Coffee most of their strategic factors take an intermediate amount of time to
accomplish. This means they can accomplish these factors within 3 years which is fast in terms
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Competitive Profile Matrix
The Competitive Profile Matrix is used to help design an offensive or defense strategy
plan for the company (Kipley & Jewe, 2014). This is done by identifying the major strength and
weaknesses in relation to its main industry competitors. This analysis provides the company with
important internal strategic information. With Starbucks Coffee, Peet’s Coffee and Dunkin
Doughnuts has been identified as their two biggest competitors. Each company has a critical
success factor that they excel in. Peet’s Coffee’s coffee beans are free trade coffee which does a
more quality to them than Starbucks Coffee and Dunkin Doughnuts. Starbucks Coffee has the
strongest customer loyalty, especially with their rewards program, allowing them to high the
highest rating in this section. When looking at the three companies weighted scores, Starbucks
Coffee has the highest with Dunkin Doughnuts close behind them and Peet’s Coffee the last.
Marketing
Marketing is an essential process in how successful a company can be. Marketing can be
described as the process of defining, anticipating, creating, and fulfilling the customer’s wants
and needs for products and services (Kipley & Jewe, 2014). By developing good marketing
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campaigns, a company can hope to drive sale, inform consumers about the business, and most
importantly develop brand loyalty. There are six basic functions of marketing which help
companies develop strengths within their marketing team. These functions include customer
analysis, selling products/services, product and service planning, pricing, distribution, and
marketing research.
Starbucks Coffee’s marketing strategy has been successful for them allowing them to
develop a strong brand image and loyal customers. This is due in part to their ability to switch up
their marketing strategies over the years. Their marketing technique is individualized to fit the
promotion of the Starbucks brand while applying the unique concept it was built on (Starbucks
Marketing Strategy, n.d). Three of their top campaigns include the Perfect Cup of Coffee, Third
The Perfect Cup of Coffee campaign focuses on the quality of the product in relation to
their price (Starbucks Marketing Strategy, n.d). Starbucks Coffee has a history of placing
emphasis on their quality product. Their coffee may be priced slightly higher than others, but
will leave consumers satisfied with their coffees rich, delicious taste and aroma. The Third Place
strategy was Starbucks Coffee idea of making Starbucks the third place to go in between work
and their house. By creating a unique and relaxing experience and atmosphere, Starbucks Coffee
realized this is one of their strongest concepts attached to their company in which their customers
have found a lot of value in. Lastly, their Brand Marketing is based mostly on word-of-mouth
advertising. This type of advertising is beneficial for the company since it is completely free
advertising. Starbucks Coffee does this by allowing their high quality product and services speak
for themselves.
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Operation
their business. Also known as production, this function is responsible for the operations and
productions through a series of production processes. The main five functions for most
companies include process, capacity, inventory, workforce, and quality. For Starbucks Coffee,
since they have such a large company for their operation management they have six different
basic strategies depending on what part of their business is being analyzed (De'Gain, 2013).
These strategies include global strategy, competitive strategy, quality strategy, process strategy,
layout strategy, and inventory strategy. All of these strategies were developed to help Starbucks
The global strategy is Starbucks Coffee idea of expanding into the global market. In 2001
Starbucks Coffee began entering into joint ventures with the local businessmen (De'Gain, 2013).
Additionally, they developed a strong expansion campaign. There competitive strategy includes
factors such as focusing on differentiation by serving niche buyers, having unique capabilities to
serve needs of target buyer segments, and to become a large enough to be profitable and offer
growth potential. Their quality strategy is very straight forward; they want their products to be of
top quality. They use mystery shoppers to ensure this is happening store level but management
wise the Starbuck Coffee buyers spend about 18 weeks each year visiting coffee grower and
suppliers to ensure their suppliers are of the best quality. These are some examples of how
Management
There are four basic functions of management: planning, organizing, directing, and
controlling (Kipley & Jewe, 2014). Planning involves the ongoing, comprehensive process that
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requires management to evaluate where the company is and where they should be in the future.
relationships. Directing oversees the behavior of the staff through motivation, communication,
department dynamics, and departmental leadership to help achieve company goals as well as the
individual employees own personal or career goals. Controlling, the last function, is an ongoing
process that involves establishing performance standards based on the company’s objectives and
basic organizational structures (Meyer, 2017). There organizational structure is broken down into
functional structure, geographic divisions, product-based divisions, and teams. When CEO
Howard Schultz was working for Starbucks he found he had the impulse to micromanage
(Lebowitz, 2016). For his management team he recruits top performers and encourages them to
step up and push back against him when they don’t agree with his ideas. He believed the most
important task as a leader was to teach people how to think and ask the right questions.
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BCG Matrix
The BCG Growth Share Matrix was developed in the 1970’s by Bruce Henderson
(Kipley & Jewe, 2014). This model classifies products of a company into four different
categories and quadrants based on a combination of the company’s market growth and market
share relative to their largest competitor. A product or business must have relative strengths to
ensure they will be in a dominant position to be placed in quadrant 3 or 1. The main purpose of
the BCG Matrix is to identify id a company has a balanced portfolio of products including high-
growth products as well as low-growth products. This matrix helps managers decide which
Quadrant 3 is the star or high growth, high market share section (Kipley & Jewe, 2014).
Companies who fall within this section have a high market share in a growing market but they
still require considerable resource support. Quadrant 2 is the question mark or high growth, low
market share section. Companies here are typically or have new products are found here because
buyers have not discovered them yet. They have a high demand but a low return due to low
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market share. Quadrant 1 is the cash cows or low growth, high market share section. These are
companies who that have high market share in a mature market and have competitive advantage
allowing for substantial cash flow. Lastly, quadrant 4 is the dog or low growth, low market share
section. This should be avoided at all cost and companies who find themselves here should divest
Mapping our Starbucks Coffee their relative market share and market share rate was
found from advfn.com. With this information, Starbucks Coffee has been placed in the star
section. This a good position for them to be in because it secures them in the best position allows
them strategies to maintain their positioning. The company’s attractiveness is great and their
GE/McKinsey Matrix
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The GE/McKinsey Matrix is similar to the BCG growth share matrix since they both map
the company on a grid to show their performance relevant to the industry (Kipley & Jewe, 2014).
This matrix was developed in the 1970’s also by was designed by a consulting group called
McKinsey designed to screen the multiple SBUs for General Electric. The GE/McKinsey Matrix
uses nine cells instead of the BCG’s four to further explore the relationships of the company. The
GE/McKinsey Matrix looks at the industry attractiveness and business unit strength to determine
its positioning. Starbucks Coffee according to the GE/McKinsey Matrix has a medium level of
industry attractiveness, but their BUS is very high. This places them in a position for investors to
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Industry Life Cycle (ILC) Analysis
Every company and industry goes through a five phase process known as the industry life
cycle (Kipley & Jewe, 2014). Keeping an eye on various industries it has been shown that
companies go through periods of growth then interrupted by periodic recessions and recoveries
which shape the products and companies in the industry. Some industries will experience
continued growth while others will see their growth slowed down and even decline. This growth
curve typically describes the evolution of need demand and can be subdivided into four phases:
The emergence period is a turbulent time when an industry is born and many aspiring
competitors are seeking to capture leadership (Kipley & Jewe, 2014). Accelerated growth is
when the surviving competitors are most profitable and the demand typically outpaces the supply
growth. Decelerated growth is the early sign of saturation and the supply begins to exceed
demand. A mature industry is where the saturation is reached and there is a substantial
overcapacity. Lastly, with a declining industry the demand is either lowered and nonexistent.
This can be due to economic factors, demographic factors, rate of production obsolescence, or
product consumption.
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Starbuck Coffee’s industry is the coffee and casual drinks industry. This industry is in the
earliest stages of maturity. Around every corner a coffee house, or a restaurant that sells coffee is
found. A consumer does not need to drive more than 5 minutes to get coffee in an urban
populated town. Since coffee is an inelastic item there will always be a high demand for coffee.
Because of this the coffee industry will most likely never see a decline in demand.
SPACE Matrix
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The Strategic Position and Action Evaluation (SPACE) Matrix is used to determine what
type of strategies a company should invest in (Kipley & Jewe, 2014). The Space Matrix has four
quadrants and indicates whether a firm should follow an aggressive, conservative, defensive or
competitive strategy. The SPACE Matrix looks at the financial strength and competitive
advantages compared to the environmental stability and industry stability. Combined these
factors are considered the four most important determinants of an organizations overall strategic
position.
Going clockwise starting in the top left quadrant the sections represent conservative,
aggressive, competitive, and defensive (Kipley & Jewe, 2014). After completing a SPACE
analysis on Starbucks Coffee, their totals plotted them within the aggressive quadrant on the
matrix. To follow an aggressive strategy, Starbucks Coffee can consider backward, forward or
diversification. When completing the SWOT analysis, EFE, and IFE earlier, these were all
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Grand Strategies Matrix
The Grand Strategy Matrix is used with the SWOT Matrix, Space Matrix, BCG Matrix,
and IE Matrix to create different and alternative strategies for a company (Kipley & Jewe, 2014).
A company is placed within one of the four strategy quadrants with each quadrant containing
different sets of strategies. The Grand Strategy Matrix places companies between competitive
position and market growth. In the top right quadrant companies placed here have a very strong
strategic position. Companies placed in the top right quadrant need to look at their present
approach since they are unable to compete in a growing industry. Companies in the lower left
quadrant compete in a slow-growth industries and have a relatively weak competitive position.
Lastly, companies placed in the lower right quadrant have a strong competitive position but the
Starbucks Coffee is found with Quadrant I which is in the upper right hand corner
(Kipley & Jewe, 2014). Starbucks Coffee should concentrate on developing their existing
markets through market penetration and market development. Additionally, they can develop
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their current products through product development. Companies that typically fall within
QSPM Matrix
The Quantitative Strategic Planning Matrix (QSPM) is a high level strategic management
approach that objectively evaluates possible strategies based on previously identified external
and internal critical success factors (Kipley & Jewe, 2014). This provides a company with an
analytical method for comparing alternative actions using the inputs from the EFE Matrix, IFE
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Matrix, and the CPM, and matching the results with the results from the SWOT, SPACE, BCG
Matrix, IE Matrix, and Grand Strategies Matrix to decide objectively among alternative
strategies. The QSPM identifies the relative attractiveness of various strategies based upon the
impact of which external and internal critical success factors are improved upon.
For Starbucks Coffee, product development and market penetration were identified as the
most important strategic alternatives for the company to look into. When looking at the
clearly more important strategically. A lot of the SWOT analysis identified issues that could be
Analysis from all the matrixes together has determined that Starbucks Coffee is currently
strategically doing well. This doesn’t mean here isn’t room for them to improve to enhance the
company’s brand and wealth. One of the main issues most matrixes identified is a need to invest
in product development and market penetration. Starbucks has a variety of products within store
operation include merchandise and baked goods. They have venture into the at home market by
selling products such as their coffee and teas for at home enjoyment and the ready to drink line.
By investing in selling other products such as their tumblers or accessories at local groceries they
could see a potential increase in sales. Additionally, if Starbucks Coffee is feeling completely
confident, they could potentially enter a new industry to diversify their company portfolio.
Additionally, the matrixes identified market penetration as the biggest strategic strategy
to peruse. This is due to the fact that Starbucks Coffee has already expanded their brand into
parts of China, Asia-Pacific, Europe, Middle East, Russia and Africa. By expanding their
network of stores in these areas will be important because it will open up new revenue streams
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for the company. Additionally, it will increase Starbucks Coffee’s brand name. Globalization is
at its peak and Starbucks Coffee should utilize this in order to successfully grow their brand
overseas.
Financial Ratio Analysis is often used in strategic planning to calculate how a firm is
preforming based on the balance sheet, income statement, and market valuation (Kipley & Jewe,
2014). These ratios provide the company significant information about the performance of the
firm. By analyzing the financial position of the company, these ratios can help identify
companies that will survive or companies who will eventually fail. There are five different types
of ratios that can help a company determine this; liquidity leverage, activity, profitability, and
growth. All ratios were collected from ADVFN.com on Thursday April 27 th, 2017.
Liquidity Ratios
Leverage Ratios
This measures the extent to which a company has been financed by debt.
Activity Ratios
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Profitability Ratios
This measures the overall effectiveness as shown by the retunes generated on sales and
investment.
EBITA: $4,279,900
Growth Ratios
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Pro-Formal Financial Statements
Income Statement
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Balance Sheet
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40
Cash Flow
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Work Cited
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fromhttp://www.valueline.com/Stocks/Highlights/SWOT_Analysis__Starbucks_Corp_.
px#.WQNqhHeZPeS
De'Gain, L. (2013, June 28). The Operation Management Strategies of Starbucks. Retrieved
Greenspan, R. (2017, January 31). Starbucks Coffee's Five Forces Analysis (Porter's Model).
porters-model
Gregory, L. (2017, January 31). Starbucks Coffee's Vision Statement & Mission Statement.
mission-statement
Lebowitz, S. (2016, March 03). 2 brilliant management strategies Howard Schultz used to build
http://www.businessinsider.com/management-strategies-of-starbucks-ceo-howard
schultz-2016-3
Let's Look At Starbucks' Growth Strategy. (2016, September 19). Retrieved April 28, 2017, from
https://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-starbucks
growth-strategy/2/#8f8a9bc57816
Lombardo, J. (2017, January 31). Starbucks Coffee SWOT Analysis. Retrieved April 28, 2017,
from http://panmore.com/starbucks-coffee-swot-analysis
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Meyer, P. (2017, January 31). Starbucks Coffee Company's Organizational Structure. Retrieved
structure
Starbucks Company Profile. (2017, January). Retrieved April 28, 2017, from
http://www.citationmachine.net/apa/cite-a-website/manual
Starbucks Marketing Strategy Unconventionally Effective. (n.d.). Retrieved April 28, 2017, from
http://www.voteforus.com/starbucksmarketingstrategy.html
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