Professional Documents
Culture Documents
Presentation Outline
Introduction to Starbucks Industry Overview Company Overview Site Analysis Recommendations for Improvement Focused Recommendation for Improvement Final Action Plan Impact Analysis Wrap Up
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Introduction to Starbucks
Company started in 1971 in Seattle, Washington Grew from 55 stores in 1989 to over 2,200 stores today Products sold include: - beverages - pastries - whole coffee beans - coffee-related retail items
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Industry Overview
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Industry Definition
Market Structure
Monopolistic Competition
Competitive Activity
Many companies are in the market and competition is fierce Competitors use location, product mix, and store atmosphere differentiation to establish market niche
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Political Influences
Relationships between coffee producing nations and US State & Local government controls
Economic Influences
Constant demand for food and beverages Changes in disposable income could influence purchase levels
Social Influences
Consumer preferences could shift from coffee to other beverages
Technological Influences
Use of technology can improve operational efficiencies
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Company Overview
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market penetration Provide a relaxing, attractive social atmosphere Offer high-quality products Create a great working environment Achieve profitability
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Strengths
Largest market share in industry Differentiated atmosphere
Weaknesses
Aggressive expansion could lead to managerial / financial problems
Opportunities
Whole bean sales in supermarkets
Threats
Lack of ownership of coffee farms can lead to price fluctuations
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Revenues $1,308.7 million Gross Margin 195.7 million Pre-tax Profit Margin 116.4 million Net Income 68.4 million Return-on-Assets 8.7% Return-on-Equity 11.0% Debt-to-Equity 0.04 12 mo. Revenue Growth 28.4%
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(% of Sales)
ROE
ROA
Debt/Equ
Industry
Starbucks
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Site Analysis
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Site Characteristics
Leased store located on Central Street in Wellesley Store has over 1,000 square feet of retail space and 1,000 square feet of office and storage space in the basement Second most profitable store in the fourteen store region Located one block away from Commuter Rail train station and in busy retail shopping area Only one direct competitor (Au Bon Pain) in the area
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Financial Operations
1998 Total Sales $760,576 COGS 242,593 C/M 517,983 Fixed Exp. 367,746 EBIT $150,237 1997 $796,688 262, 945 533,743 431,923 $101,820 % (4.5%) (7.7%) (3.0%) (14.9%) 47.6%
No money spent on independent advertisement Local entertainment budget underutilized The Frappuccinos
$300,000
100.0% 90.0%
$250,000
$200,000
$150,000
50.0% 40.0%
$100,000
$50,000
$0 Espresso Drinks Whole Beans Drip Coffee Pastries Blended Other Serveware Packaged Beverages Beverages Food/Tea Media Brewing Equipment
0.0%
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Strategy
Stores strategy is to create a comfortable Third Place environment Serve customer a customized high-quality product Achieve high level of profitability by focusing on high-margin items while generating add-on sales Minimize overall expenses by focusing on controllable expenses
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Structure
Functional in structure and relatively flat Corporate organization is tall with four levels of management above store management
B A S
t o r e
M t p
a n M
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s s is t a n h if t S u
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a r i s B a as r i s B a as r i s t t
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Staffing
Location has one manager, an assistant manager and 16 partners Benefits package includes health, dental, and vision care, stock options, free shift drinks, and a free pound of coffee each week Raises are based on semi-annual performance evaluations with raises ranging from 0-5% Bonuses are not utilized, but the location has given away non monetary rewards
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Systems
Corporate headquarters exercises controls over individual sites
Total Quality Management is specifically built into their processes
Utilizes a large amount of information technology (IT) Internal controls for the store are determined by the manager based in part on information provided by the IT system
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Stores
Individual Stores
Corporate IT System
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Skills Most important skills include people skills and drink preparation ability Partners receive training to learn about products, brewing methods, and sales techniques Retraining mainly occurs during new product rollouts, although this site does not use regular meetings, but instead one-to-one discourse
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No
Take Customers Order Bottleneck Order?
.53 Min
Yes No
Pastry?
.40 Min
.27 Min
Style
Basic management style is Laissez Faire Management motivates through reviews and raises Work duties are assigned by shift supervisors Employees are allowed to use initiative and empowered to make decisions
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Recommendations
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Focused Recommendation
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Cons
Pay and benefit structures dictated by corporate HQ Cost of benefits would additional benefits lower site profitability New reward system requires additional management
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Cons
Staffing is a cost that will decrease profitability Upper-level management perception of low employee productivity Employees may get in each others way The Frappuccinos
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Potential Risks
Customers may not react positively to the changes being made Not enough available employees to meet realigned hiring needs Claims of age discrimination and negative affect on sales in youth demographic Costs associated with planned change
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Wrap-Up
Starbucks is the market leader in a growing market segment Starbucks is known world-wide for its highquality food products and differentiated Third Place atmosphere The Wellesley location embodies the ideals of the corporate mission and has been very profitable, but there are still opportunities for improvement
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Conclusion / Questions
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