Case13 - Starbucks Corporation

UNIVERSITY OF BOHOL
PROFESSIONAL STUDIES
CASE 13 – STARBUCKS CORPORATION
CASE STUDY
November 19, 2022
Report submitted to:

Dr. AMMON DENIS R. TIROL, DM, CPA
as partial fulfillment of the requirements in
BA207 – BUSINESS POLICY
First Semester AY 2022-2023
KEZIAH REVE B. RODRIGUEZ

MASTER OF SCIENCE IN BUSINESS ADMINISTRATION
Case 13 – Starbucks Corporation
BA207 Business Policy
University of Bohol Graduate School and Professional Studies
Table of Contents
Introduction 4
The History of Starbucks Corporation 4
Organizational Profile 5
Product 5
Services 6
Vision 6
Mission 6
Components of Starbucks Mission 6
Goals 6
PESTEL Analysis 7
Political Factors 7
Economic Factors 7
Social Factors 7
Environmental Factors 8
Legal Factors 8
External Factor Evaluation (EFE) Matrix 8
Competitive Analysis: Porter’s Five Forces Model 9
Rivalry among existing competitors: High to Moderate 9
Bargaining power of buyers or customers: Moderate to Low Pressure 10
Bargaining power of Suppliers: Low to Moderate Pressure 10
Threat of substitute products or service: High 10
Threat of new entrants or new entry: Moderate 10
Competitive Profile Matrix 11
Internal Environment Analysis 12
Corporate Resources – Marketing 12
Corporate Resources - Research and Development 13
Corporate Resources- Operation management 13
Corporate Resources - Human Resource Management 13
Financial Aspect 13
Internal Factor Evaluation (IFE) Matrix of Starbucks Corporation 14
Starbucks Coffee and its Competitors 15
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Starbucks Strategy 16
Rapid store expansion Strategy 16
Product Line 16
Coffee Purchasing Strategy 16
Employee Training and Reorganization 16
Culture of Starbuck Corporation 17
Starbucks Corporation – Analysis Summary 17
Recommendation 18
Conclusion 18
References 19
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Introduction
Starbucks Corporation is largely operating and competes in the retail coffee and
snacks store industry worldwide. The first Starbucks store opened in Seattle’s Pike Place
Market in 1971. In 1981, Howard Schultz, recognized a great opportunity and began
working with the founder Jerry Baldwin. Starbucks Corporation has a total of 182,000
employees across 19,767 companies. It also operates & licensed stores in 62 countries.
Their product mix includes roasted and handcrafted high-quality premium. Priced coffees,
tea, a variety of fresh food items and other beverages. They also sell different types of
coffee, tea products and license their trademarks through other channels for example
licensed stores, grocery, and national foodservice accounts. In July 2009, Starbucks began
gaining coffee each time a new pot is brewed, instead of gaining only the morning. This
industry experienced a major slowdown in 2009 because of their economic crisis and
also changing consumer tastes, with the industry revenue in the US declining 6.6% to $25.9
billion. Before this, the industry had a decade of increase steady. Starbucks Corporation
that also markets its products mix with the other brand names within its portfolio of
companies, which include, Tazo, Teavana, Seattle’s Best Coffee, and Starbucks VIA,
Starbucks Refreshers, La Boulange, Verismo, and Evolution Fresh. Starbucks total revenue
is $14.89 billion that in 29th, September 2013.
The History of Starbucks Corporation
The first Starbucks store opened in Seattle’s Pike Place Market in 1971. The
company grew to be the largest roaster in Washington with multiple locations until the early
1980’s. In 1981, Howard Schultz, recognized a great opportunity and began working with
the founder Jerry Baldwin. In 1983, while travelling in Italy, Schultz experiences Italian
Coffee bars and inspires him. In 1985, Schultz leaves Starbucks to open II Giornale, a
company serving espresso drinks using Starbucks coffee beans. In 1987, Schultz
purchases Starbucks from the founders and begins to expand throughout the US. On the
year 1992, Starbucks Company goes public. In 1993, it opens its first roasting plant in
Washington. When Schultz come from Italy then test of coffee impressed him. Then me
make an idea Schultz wanted to bring the Italian café culture to the United States. Selling
espresso by the cup was the first test. Schultz left Baldwin to open his own and raised
money from investors to purchase the Italian Coffee House Giornale.
The company experienced rapid growth going public in 1992, and growing tenfold
by 1997, with locations around the United States, Japan, and Singapore. Starbucks also
began expanding its brand by selling their product Starbucks coffee on United Airlines
flights, selling premium teas via Tazo Tea Company, offering order Starbucks coffee online.
This kind of strategy they use to expand their business. They also introduced new product
and operations. Starbucks opened 200 new stores outside of the United States during 2000,
150 of which the Asia Pacific Region, and opened first store in Dubai and Hong Kong, and
100th stores in both Japan and United States. The following year, Starbucks opened a store
in Zurich, Switzerland marking its first venture into continental Europe. Starbucks
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experienced its first setback in 2002 when its Japanese operations posted a $3.9 million
loss, despite a 15 percent increase in revenues and 108 new stores opening and the first
low performance locations were closed. However, when the economics recession hit in
2007 and simultaneously McDonalds entered the coffee business big time, Starbucks
closed 600 underperforming stores in the United States in 2008 and planned to open 200
new stores in 2009. In 2011, they celebrated their 40th anniversary.
Organizational Profile
• Name of the company: Starbucks Corporation

• Founder: Gordon Bowker, Jerry Baldwin, Zev Siegl
• Date of Establishment: Starbucks was established in 1971, Pike Place Market,
Seattle, Washington, United States
• Headquarters: 2401 Utah Avenue South, Seattle, Washington, United States
• CEO: Howard Schultz (Apr 4, 2022 – Apr 1, 2023)
• Industry: Coffee Shop
• Type: Public Limited Company
• Number of Stores: 34,317 (2022)
• Assets: US$31.39 billion (2021)
• Annual Revenue: US$29.06 billion (2021)
• Area Served: Worldwide
• Total Employees: 383,000 partners (2021)
• Logo:
• Website: https://www.starbucks.com/
Product
Starbucks Corporation in 2009 is particularly famous for its different types of coffee. They
also provide a variety of beverages. They have other products like coffee, grounded coffee beans,
tea, food, cold drinks (milk, water, juice). They also established brands like Starbucks Coffee,
Seattle‘s Best Coffee, Tonefazione Italia Coffee, and Tazo Tea. They produce and sell ready-to-drink
beverages like Starbucks bottled Frappuccino beverage, Starbucks Discoveries chilled cup coffees,
Starbucks Double Shot espresso drinks, Starbucks Double shot energy and coffee drinks, Seattle‘s
Best Coffee Iced Lattes, Tazo bottled iced and juiced, whole beans and ground coffee. Starbucks
locations serve hot and cold drinks, full- and loose-leaf teas including Teavana tea products, and
pastries & snacks including items such as chips and crackers, some seasonal offerings to the locality
of the store. Many stores sell pre-packaged food items, hot and cold sandwiches, and drink ware
including mugs and tumblers, select "Starbucks Evenings" locations offer beer, wine, and
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appetizers. Starbucks-branded coffee, ice cream, and bottled cold coffee drinks are also sold at
grocery stores.
Services
Starbucks provide hot and cold drinks otherwise they also other services provided
in coffee stores. They provide great service, relieving atmosphere, pleasant interior, and in
some stores, a Wi-Fi connection. Their intangible service is their friendly interaction with
customers. Starbucks have placement. Coffee store, supermarket, restaurants, bakeries,
and online store for customer. Sometimes they provide free coffee in determinate period,
receipt as coupon, online coupon, cards, special offers in their website (buy 2 and get 1
free/special discounts) music and seasonal products. Their product is always fresh, and
convenient. Starbucks also provide different gift items for customers like coffee and tea-
brewing equipment, mugs, and accessories, packaged goods, music, books, and gift items.
Starbucks Coffee product has variety quality design. Their tea packaging services is
attractive, and always easy to handle just in time.
Vision
Starbucks Corporation has own vision which is “to inspire and nurture the human
spirit – one person, one cup, and one neighborhood at a time.”
Mission
Starbucks mission reflects what they are doing, and it is to keep its business running.
Components of Starbucks Mission
Coffee: It has always been, and will always be, about quality
Starbucks Passion: Together, we embrace diversity to create a place where each of us
can be ourselves
About stores: It’s about enjoyment at the speed of life – sometimes slow and savored,
sometimes faster. We want to be invited in a neighborhood in wherever we do business.
Goals
Starbucks Corporation sets new hiring goals, including employing. Starbucks coffee
now has a loyal following, which represents the firm’s effectiveness in the inspire and
nurture the human spirit aspect. Starbucks wants customers to smell coffee aroma all day
long. This change is part of the company’s effort to reinvigorate the “Starbucks experience”.
Starbucks coffee products helped the business by creating “unprecedented awareness for
the coffee category overall.”
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PESTEL Analysis
Political Factors
This part of the PESTEL analysis framework identifies the impact of the government
in businesses. Starbucks experiences the following political external factors in its remote or
macro-environment:
• Regional integration of markets (opportunity)

• Improving governmental support for infrastructure (opportunity)
• Low labor standards in developing countries (opportunity)
Regional integration is a current trend and external factor that presents an opportunity for
Starbucks to globally expand. Most government agencies around the world are improving
in terms of infrastructure, which creates the opportunity for Starbucks to access more
market or supplies. This external factor is a threat because it makes business extension
more difficult for Starbucks, especially in developing countries. Thus, these aspects of the
PESTEL analysis model presents mostly opportunities for Starbucks coffee.
Economic Factors
This component of the PESTEL analysis model refers to the economic conditions
and changes significant to business. Starbucks faces the following economic external
factors in its remote or macro-environment:
• High growth of developing countries (opportunity)

• Declining unemployment rates (opportunity)
• Rising labor cost in supplier countries (threat)
The high economic growth of developing countries and the declining unemployment rates
create opportunities for Starbucks to gain more revenue from market around the world.
However, the rising labor costs in developing countries is the external factor that serves as
a threat for Starbucks because it increases the companies spending on labor costs.
Starbucks must develop strategies to minimize such issue.
Social Factors
This aspect of the PESTEL analysis framework shows the social conditions and
trends influencing consumers and businesses. Starbucks must address the following social
external factors in its remote macro-environment:
• Growing coffee culture (opportunity)

• Increase health consciousness (opportunity)
• Growing middle class (opportunity)
Starbucks has opportunity to increase its revenues based on increasing demand for
specialty coffee, which is due to a growing coffee culture and a growing middle class around
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the world. Also, the company can widen its array of healthful products to attract health-
conscious customers to Starbucks café. Therefore, all the identified external factors in this
component of the PESTEL analysis model, opportunities are mostly present for Starbucks
Corporation.
Environmental Factors
There have been several concerns about the business practices of Starbucks from
the activists, international advocacy groups, and from the consumers themselves.
Starbucks must consider these concerns if it must continue holding to the trust it enjoys
from its customers and consumers.
Legal Factors
Starbucks must ensure that it does not run afoul of the laws and regulations in the
countries from which it sources its raw materials as well as the home markets in the United
States.
External Factor Evaluation (EFE) Matrix
The EFE matrix is a strategic tool used to evaluate a firm’s existing strategies, EFE matrix
can be defined as the strategic tool to evaluate external environment or the macro
environment of the firm include economic, social, technological, government, political, legal,
and competitive information.
Assign each factor a weight in the range from 0.00 to 1.00 according to the importance of
the strengths or weaknesses, the sum of the weights must be equal to 1.00. Where 0.00 is
equal to the factor that is not important and the 1.00 is equal to the factor that is the most
influential and critical one.
The ratings are used to indicate how effectively the company’s current conditions respond
to the factor. Then assign a rating between 1 to 4 into each factor. Where 1.00 is equal to
the response is poor, 2 is equal to the response that is below average, 3.00 is equal to the
response that is above average, and 4 is equal to a superior response.
To arrive to a total weighted score for the company studied, add all the weighted scores for
each factor. The overall evaluation resulting to weighted ratio evaluates the internal position
of the organization or strategic intent. The best possible score is 4, while the worst is 1.
Average values are around 2.5.
EFE of Starbucks Corporation – 2009
Factors Weight Rating Weighted Score

Opportunities
Expansion in Asia, the Middle East, and Africa 0.16 4 0.64
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Diversification of product mix 0.04 2 0.08

Partnerships or alliances with other firms 0.06 2 0.12
Technological advances: 0.10 4 0.40
New distribution channels: 0.08 4 0.32
Coffee imports are currently duty-free and the quota 0.04 3 0.12
for purchases is unlimited.
Brand extension 0.08 4 0.32
Coffee is a daily routine for a lot of Americans, and 0.04 3 0.12
many appreciate convenience.
Threats
Competition from low-cost coffee sellers 0.10 3 0.30
Price Volatility in the Global Coffee Market 0.05 4 0.20
Independent coffeehouse movements 0.05 2 0.10
Strong competition 0.15 4 0.60
Developed Countries Economy 0.05 3 0.15
Total
Total weight 1.00 weighted 3.47
score
Analysis:
The best score is 4 and the lowest score is 1. Therefore, Starbuck’s situation is good
as the total weighted score is 3.47, the company is going smoothly, and its performance
and condition is considered as very good.
Competitive Analysis: Porter’s Five Forces Model
Rivalry among existing competitors: High to Moderate

The company growth rate is moderately low that may cause the force of competition
among the companies that is moderately high because of all of them seeking to the market
shaper from recognized firms like Starbucks. It does not have over capacity currently and
all those factors contribute to the intensity among rivals to be moderately high and its nearby
competitors also have an important market share, creating considerable pressure on
Starbucks. Looking at the Porters five forces analysis, an aggregate industry analysis could
be formulated stating that the strength of forces and the profitability in the retail coffee and
snacks industry are Moderate.
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Bargaining power of buyers or customers: Moderate to Low Pressure

Starbucks offers a variety of products, which make relatively low volume purchases,
of buyer’s and there are no switching costs with high availability of the substitute products.
Industry leaders like Starbucks prices its product mix in relation to rivals stores with popular
market price elasticity and aggressive best pricing. There are different types of buyers in
this industry and the buyers can’t demand price concession and the Consumers have a
moderate feeling in premium coffee retailing as they pay a premium for best quality products
offered.
Bargaining power of Suppliers: Low to Moderate Pressure

The suppliers in the industry also pretense a low threat to competing Starbucks by
forward vertical addition, which made low on their power. Starbucks Corporation’s size and
scale gives them an advantage as to its suppliers, but this is used to maintain fair trade
certified coffee below its coffee and farmer equity programs, which gives it suppliers a fair
partnership status. Starbucks also forms a highly significant part of the supplier’s business,
because of size and scope, which make the power of the suppliers lower. Given these
factors, suppliers pose a moderately low bargaining power.
Threat of substitute products or service: High

There are different types of reasonable replacement beverages to coffee that are
mainly fruit juices, tea, energy drinks, etc. However, it is more important that industry
leaders alike to Starbucks are currently trying to counter this threat by selling coffee.
Consumers also can make their own home-produced coffee at their homes at a low-cost
like Starbucks. It is more important that there are no switching costs for the consumers for
switching to substitutes, which makes the threat high.
Threat of new entrants or new entry: Moderate

There is a moderate threat of new entrants into the industry as the barriers to enter
are not high enough to dishearten new competitors that enter the new market. Locations
and price competition are moderately high, that will create a moderate obstacle to entry. At
a moderate level of investment. At a localized level, small coffee shops can compete with
the likes of Starbucks and Dunkin Brands because the industry’s dissemination is
moderately high with a monopolistic competition constitution. The initial investment is not
significant for the new entrants as they can lease tools stores. Starbucks achieved
economies of scale by low cost and improve proficiency with an enormous market share. It
is more important that there are no switching costs for the consumers and it’s a competitive
industry product quality, its prime real estate locations are also important but this relatively
easy access in the market is usually countered by large present brands. The incumbent
firms like Starbucks have a larger scale and scope, yielding them a learning curve
advantage and favorable entrance to raw material with the relationship they build with their
suppliers.
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Competitive Profile Matrix
Competitive Profile Matrix (CPM) is a strategic management tool which is used to

identifies a firm's major competitors and its strengths and weaknesses. Based on this
comparison, the firm can design its strategies. Critical success factors in a CPM include
both internal and external issues. The ratings of CPM refer to strengths and weaknesses,
where 4 = major strength, 3 = minor strength, 2 = minor weakness, and 1 = major weakness.
Starbucks Caribou coffee Gloria Jean's

coffee
Critical Success Weight Rating Weighted Rating Weighted Rating Weighted
Factors Score Score Score
Advertising 0.10 4 0.40 4 0.40 3 0.30
Product Quality 0.20 4 0.80 3 0.60 2 0.40
Price 0.05 2 0.10 3 0.15 3 0.15
Competitiveness
Management 0.08 3 0.24 2 0.16 3 0.24
Financial Position 0.05 3 0.15 3 0.15 2 0.10
Customer Loyalty 0.10 3 0.30 2 0.20 2 0.20
Global Expansion 0.15 4 0.60 2 0.30 2 0.30
Employee Benefits 0.10 4 0.40 2 0.20 2 0.20
Customer Service 0.17 3 0.5 2 0.34 2 0.34
Total 1.00 3.50 2.50 2.23
Analysis:
The highest possible total weighted score of an organization is 4.0 and the lowest
possible total weighted score is 1.0. Here, Starbucks score 3.50, and it is the highest score
in this matrix. It can be pointed out that Starbucks is in a very good condition. Gloria Jean’s
coffee gained the lowest score that is 2.23.
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Internal Environment Analysis
Corporate Resources – Marketing

Starbucks Corporation is one of the best coffee companies and coffee house chains in
America. They follow various types of marketing strategy to maintain their corporation.
First, identify and know the 4Ps of Starbuck’s Marketing Mix: Product, Price, Place, and
Promotion.
Product Price
• Coffee • Prime price for prime products
• Fresh Food Items • Their prices are quite high as they
• Handcrafted Beverages ensure quality
• Starbucks Ice Cream
Place Promotion
• Store, grocery stores, department • Less traditional advertising
stores • More emphasis on image
• In cinemas and theatres advertising
• Business establishments, schools, • Starbucks card (information and
and airports discounts on products, shop online,
search for careers, etc)
Different types of marketing strategies:
• Different types of quality product – premium quality tea and coffee though price is
quite high than the competitors
• Adjusted prices of its more popular products to show responsiveness budget
conscious consumer
• Stores are designed to make customer comfortable and make sure to give
customers a friendly meeting place
• They also provide electric outlets, and some stores have wireless access so people
can easily use laptop o MP3 player if they need
• They can create ethical brand image throughout the years
• They are using unconventional social media techniques of establishing consumer
connection
• Less use of traditional methods for marketing
• They basically use their brand image for marketing
• They are very much focused on consumer satisfaction for this they try to create
comfortable environment for customer
• They are also concern about their employees and try to keep them happy and create
a friendly environment for jobs
• Able to crate real or loyal customers
• They have introduced Starbucks card with the hope of strengthening customer
loyalty by improving service
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• They used to give information about nutritional facts about Starbucks products,
online shops, and opportunity to search for jobs.
Corporate Resources - Research and Development

Starbuck’s Research and Development team found out that they should have to
produce new products that are both trendy and stable. Their product can be found in
convenience stores, grocery stores, movie theaters, businesses, schools, and even
airports. They rely more on image advertising than traditional advertisement because they
want to show the customer that they are not only retail outlet they are also responsible to
their communities and employees. Starbucks rated by 10 fortunes as one of the best 10
places to work.
Corporate Resources- Operation management

Starbucks was founded in 1971. It is a wholesale business that sold coffee primarily
to local restaurants. Starbucks offers products and café services throughout the world. It
sells high quality whole bean coffees, premium teas, and espresso beverage, hot and cold.
It is not just their business; it is their passion. The stores are designed to make customer
comfortable. They provide ethical outlets and wireless access so that customer can use
MP3 players or laptop computer. Starbucks has 3 reportable operating segments: United
States, International and Global consumer product. They are highly concern about their
quality. They collect the finest coffee beans, roasting them with great care and improving
the lives of people who grow them.
Corporate Resources - Human Resource Management

Human resource management is one of the most difficult and important work forces
for all management tasks. Starbucks is known to have the best management team and staff.
They are all about their partners working in a group. Every partner hired at Starbucks must
receive at least 24 hours of training in two weeks. The entire employee must master the
star skills.
Financial Aspect
Starbucks Corporation’s financial ratios are given below. This is based on the data
from 2007 to 2008.
Current Ratio Quick Ratio

Current Ratio = Current Assets/Current Liabilities Quick Ratio = (CA - Inventories)/CL
2008 = 1748000/2189700 = 0.79 2008 = (1748000 – 692800) / 2189700 = 0.48
2007 = 1696487/2155566 = 0.78 2007 = (1696487 – 691658) / 2155566 = 0.46
Debt-to-Total Assets Ratio Debt-to-Equity Ratio
Debt-to-Total Assets Ratio = TD/TA Debt-to-Equity Ratio = TD/TSHE
2008 = 3181700 / 5672600 = 0.56 2008 = 3181700 / 2490900 = 1.27
2007 = 3059761 / 5343878 = 0.57 2007 = 3059761 / 2284117 = 1.33
Total Assets Turnover Operating Profit Margin
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Total Assets Turnover = Sales/TA Operating Profit Margin = EBIT/Sales

2008 = 10383000 / 5672600 = 1.83 2008 = 512900 / 10383000 = 0.049
2007 = 9411497/ 5343878 = 1.76 2007 = 1056364/ 9411497 = 0.112
Net Profit Margin Return on Total Assets (ROA)
Net Profit Margin = Net Income/Sales Return on Total Assets = Net Income/TA
2008 = 315500 / 10383000 = 3.03% 2008 = 315500 / 5672600 = 5.56%
2007 = 672638/ 9411497 = 7.14% 2007 = 672638/ 5343878= 12.58%
Return on Equity (ROE) Earnings per Share (EPS)
Return on SHE = Net Income/ TSHE Earnings per Share = Net Income/ No. of Shares
2008 = 315500 / 2490900 = 12.6% of Common Stock Outstanding
2007 = 672638/ 2284117= 29.4% 2008 = 315500 / 700 = 450.71%
2007 = 672638/ 738 = 911.43%
Internal Factor Evaluation (IFE) Matrix of Starbucks Corporation
The table below shows the weaknesses and strengths calculation of Starbucks Corporation.
Factors Weight Rating Weighted Score

Strength
Strong brand image 0.20 4 0.80
Extensive global supply 0.10 4 0.40
chain
Diversified business 0.10 4 0.40
Diversification of production 0.15 3 0.45
Alliances with other firms 0.13 2 0.26
Weakness
Higher price points 0.12 1 0.12
Generalized standards for 0.10 2 0.20
most products
Imitable Products 0.10 2 0.20
Total weight 1.00 2.83
Analysis
The weighted score for Starbucks Corporation is 2.88. The average score is 2.5.
Above the 2.5 weigh indicates a strong internal position. The company has a 2.83 score
that indicates a good score.
Starbuck’s Problems
• Starbucks stocks has sold off as result of a miss on same store growth metric- yet
that misses the BIG picture of growth that lies ahead of Starbucks.
• Due its consistent growth and seller business model, investors are willing to overpay
for this stock, making buying opportunities rare.
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• Ironically, the shortfall in results was caused by the company not being able to meet
customer demand- a nice problem to have and very much solvable.
• That was my experience; but the fact it was so busy shows they must be doing
something right. I guess they don't need miserable old men like me.
• The early adopters who valued the club-like atmosphere of relaxing over a quality
cup of coffee found themselves in a minority.
• Price. The price is no different to other coffee shops. I wouldn't have minded paying
an extra 20p for better coffee and better environment.
• Opening new stores and launching a blizzard of new products create only superficial
growth.
• Starbucks introduced many new products to broaden its appeal.
Starbucks Coffee and its Competitors

Coffee is one of the world’s most popular beverages. Some claim it is the most
widely consumed liquid in the world aside from water. There is a lot of coffee company in
the world, but Starbucks Corporation has been the most successful coffee chain in the past
few decades for their aggressive expansion strategies to push out much of its focused on
creating a dense, competition, network of stores all around America, and new locations all
around the world. Starbucks began 30 years ago with one store and has experienced
phenomenal growth and success. It has grown into the largest coffeehouse company in the
world with 16,120 stores in 94 countries such as in Australia, Canada, China, Puerto Rico,
etc.
In the last few years, Starbucks has entered a battle, fighting Dunkin' Donuts and
McDonald's for the top position as coffee king. Customer desire and preference greatly
influence the fight, so each company is fighting to expand menu options and physical store
locations to reach and better serve a greater customer base and draw consumers away
from the competition. Not only Dunkin Donuts, McDonald’s but also, Caribou, Peet's Coffee,
Krispy Kreme Doughnuts etc. Starbucks main competitors are quick-service restaurants
and specialty coffee shops. There are an abundant number of competitors in the specialty
coffee beverage industry. The company believes that its customers choose among retailers
primarily based on product service, service, price, and convenience. Starbucks, in recent
times, has experienced drastic direct competition from large US competitors from quick-
service restaurants.
Dunkin Donuts is known for their doughnuts and coffee. Over the years, Dunkin has
introduced new products such as bagels, muffins, breakfast sandwiches. To compete with
the lunch crowd, Dunkin expanded their product menu to include pizzas and sandwiches.
To compete with the specialty coffeehouses, Dunkin expanded their coffee offerings to
include flavored coffees, lattes, collates, flavored hot chocolate and teas.
McDonalds has a larger customer demographic than Starbucks. While Starbucks

is the leader in the specialty coffeehouse market, McDonalds is becoming an emerging
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competitor when it first upgraded its coffee in 2006. McDonald’s coffee sales increased
15% in 2006 and plans to grow coffee sales with the plan to install coffee bars in all 14,000
U.S. locations. The McDonald's new specialty drinks, which are now in about half of the
company's nearly 14,000 US stores, already, have a following among some former
Starbucks customers.
Starbucks is a leading company around the globe. Starbucks used very simple
strategy, "connecting links between treating employees with dignity and respect and
producing good product and services." That was the major factors that differentiate
Starbucks from others and bring the successful to Starbucks.
Starbucks Strategy
Rapid store expansion Strategy

Starbucks initially focused on the domestic US market; in 1996 the company opened
its first store outside the US. Since then, Starbucks international footprint has expanded to
11266 stores located in three main markets, the America, which includes Canada, Latin
America and the US, China and Asia Pacific and Middle East and Africa. The domestic
market still represents more than half of all Starbucks stores. California with 1863 locations
has more stores than any other state. Starbucks operates two types of stores, one is
company-operated and other is licensed. Currently, the store count is almost equally
distributed between these two types-51 percent of stores are company-operated and the
other 49 percent are licensed.
Product Line
Starbucks create product lines as a marketing strategy to capture sales of
consumers already buying the brand. The operating principle is that consumers are more
likely to respond positively to brands they know and love and are willing to buy the new
products based on their positive experience with the brand.
Coffee Purchasing Strategy

They know their success as a company is linked to the success of the thousands of
farmers who grow their coffee. That’s why they are working to ensure a long-term supply of
high-quality coffee purchasing practices and by investing in farmers and their communities,
they have found that they can serve a great cup of coffee while helping to improve the lives
of farmers and protecting the planet.
Employee Training and Reorganization

New partners are never given the opportunity to make mistakes when they are new
to their job. They are always with a store manager or a learning coach as they learn the
ropes. Starbucks follows a Tell, Show, Do process. Tell is what baristas learn in the training.
Show is when the learning coach shows them exactly how to do something and Do is when
the barista does the action with the coach watching to assist, train and praise.
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Culture of Starbuck Corporation

Starbucks Coffee Company's organizational culture is one of the most distinct
characteristics of the firm. A company's organizational culture widely influences employees
and business performance. Starbuck Coffee's organizational culture has a few key
characteristics. The combination of these characteristics is unique to the firm. The company
describes its organizational culture as a culture of belonging, inclusion, and diversity. In this
regard, the main features of Starbucks' organizational culture are:
• Servant Leadership ("employees first")

• Relationship - driven approach
• Collaboration and communication
• Openness
• Inclusion and diversity
Starbucks Corporation – Analysis Summary
Internal Strategic Forces

Strengths
Quality Endless global search for quality.
Variety Offering many options and customization.
Locations Ubiquitous distribution of its set up is one of the company’s main goals.
Convenience Viability of new products depends inconvenience.
Store Ambiance Store Ambiance was important foundation stone of Starbucks and continues in
its locations.
Ethics Becomes a leader in ethics with the practice of fair trade
Weaknesses
Overexposure Setting up business in countless locations and by which becoming overexposed
as a result losing the uniqueness.
Too many products Continuous addition of products, some loses its value, and they are risky
business.
Risky investment in Expanding locations with costly investment like USA in relation to other
more locations international locations.
External Factor Analysis Summary (EFAS)
Customization Introduction of new product-“Frappuccino Canada.
International Maximizing efforts internationally, to increase stability.
Markets
On-the-Go Lifestyle Through instant coffee and other products to be in groceries and convenience
stores.
Partnerships Partnering with more locations including NYSE.
Weaknesses - Threats
Direct Competition Direct competition from Pets and Coffee Bean increasing. Lack of marketing
Recession Recession reduced customers’ willingness to spend. So, there is a greater risk in
investment.
17
Strategic Factors
Brand Identity Brand Identity is extremely important factor for the company in long terms.
Convenience Convenience made the baseline of the company and has continued to maintain
their advantage.
International Global Markets offer lower risk investment and innovation opportunities.
Markets
Cheaper Cheaper Alternatives like McDonalds threaten the convenience factor.

Alternatives
Recommendation
Starbucks has continuously used the approach of using joint venture partners to
enter new market since the company begins. It is a strategy that successfully worked for
them, and they should continue to use it entering in India. It is effective and efficient and
should be used until it shows sign of no longer being successful.
Conclusion
Starbucks had much market power in the coffee industry. They were attracting their
customers by an experience of an upscale coffee shop with a neighborhood feel. But in the
present time, their prices have increased and that’s why demand is decreasing. Customers
now-a-days do not want to spend their limited income on premium coffees that they can get
from any of their competitors, like Dunkin’ and, McDonalds. Starbucks has projected does
not hold true as the income effect and added popularity of their competitors began
monopolizing the premium coffee market. This proves that the price of coffee is elastic and
if prices are high than the demand for the good will decrease.
Many other factors also have reasons for losing its brand appeal. Now People are
beginning to realize that they have alternatives to purchasing Starbucks coffee and still
sample the luxurious blend by brewing it at home themselves. Customers are not interested
to follow the hype supported by the Starbucks name and are becoming more price/value
oriented. If they want to a major player in the coffee shop market, Starbucks must reinvent
themselves with the changing lifestyles, tastes, cheap price, and a new strategic plan.
18
References
(n.d.). Retrieved from 2.
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&
uact=8&ved=0ahUKEwiRm6_i0IjXAhWIwI8KHaBEDIgQFggwMAI&url=https%3A%
2F%2Fwww.slideshare.net%2FWilliamDuncan13%2Fstarbucks-case-study-
58030438&usg=AOvVaw2c2wBKbKT53g31FpR8J3-r
(n.d.). Retrieved from https://en.wikipedia.org/wiki/Starbucks
(n.d.). Retrieved from https://managementstudyguide.com/pestle-analysis-of-

starbucks.htm
(n.d.). Retrieved from http://blog.biographyonline.net/2008/03/problems-of-starbucks.html
(n.d.). Retrieved from http://blog.biographyonline.net/2008/03/problems-of-starbucks.html
David, F. R. (n.d.). Strategic Management.
19

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UNIVERSITY OF BOHOL

CASE 13 – STARBUCKS CORPORATION

November 19, 2022

Report submitted to:

KEZIAH REVE B. RODRIGUEZ

The History of Starbucks Corporation

• Name of the company: Starbucks Corporation

Components of Starbucks Mission

• Regional integration of markets (opportunity)

• High growth of developing countries (opportunity)

• Growing coffee culture (opportunity)

External Factor Evaluation (EFE) Matrix

EFE of Starbucks Corporation – 2009

Factors Weight Rating Weighted Score

Diversification of product mix 0.04 2 0.08

Competitive Analysis: Porter’s Five Forces Model

Rivalry among existing competitors: High to Moderate

Bargaining power of buyers or customers: Moderate to Low Pressure

Bargaining power of Suppliers: Low to Moderate Pressure

Threat of substitute products or service: High

Threat of new entrants or new entry: Moderate

Competitive Profile Matrix

Competitive Profile Matrix (CPM) is a strategic management tool which is used to

Starbucks Caribou coffee Gloria Jean's

Internal Environment Analysis

Corporate Resources – Marketing

Different types of marketing strategies:

Corporate Resources - Research and Development

Corporate Resources- Operation management

Corporate Resources - Human Resource Management

Current Ratio Quick Ratio

Total Assets Turnover = Sales/TA Operating Profit Margin = EBIT/Sales

Internal Factor Evaluation (IFE) Matrix of Starbucks Corporation

Factors Weight Rating Weighted Score

Starbucks Coffee and its Competitors

McDonalds has a larger customer demographic than Starbucks. While Starbucks

Rapid store expansion Strategy

Coffee Purchasing Strategy

Employee Training and Reorganization

Culture of Starbuck Corporation

• Servant Leadership ("employees first")

Starbucks Corporation – Analysis Summary

Internal Strategic Forces

Convenience Viability of new products depends inconvenience.

Cheaper Cheaper Alternatives like McDonalds threaten the convenience factor.

(n.d.). Retrieved from https://en.wikipedia.org/wiki/Starbucks

(n.d.). Retrieved from https://managementstudyguide.com/pestle-analysis-of-

(n.d.). Retrieved from http://blog.biographyonline.net/2008/03/problems-of-starbucks.html

(n.d.). Retrieved from http://blog.biographyonline.net/2008/03/problems-of-starbucks.html

David, F. R. (n.d.). Strategic Management.

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