Starbucks’ strategy in the specialty coffee industry.

Mohammad Robiul Alim Raja Pravu Ashraful Kabir

– 300649435

– 300642403

Presentation Outline
   

Introduction to Starbucks Industry Overview Company Overview Strategic Analysis

About Starbucks

 Overview
 

Timeline Corporate Values and Business Principles Mission Statements Corporate Social Responsibility

 

Overview

 Established in 1971 at Seattle, Washington  Famous for its quality fresh-roasted coffee beans and stylish atmosphere.  Over 9,000 stores worldwide  Product lines include : − beverages (coffee, Tazo tea, soda, juices) − pastries − whole coffee beans − coffee-related hardware and equipment − merchandise (mug, CDs)

Tea. 1992 1995 – Starbucks decertified the union and made IPO. 1982 1986 1987 – Howard Schultz established Il Giornale Coffee Company. – Il Giornale acquired Starbucks and changed the name into Starbucks Corporation. – Howard Schultz joined Starbucks. – Starbucks Coffee International opens in Japan − Starbucks implemented ESOP. .Timeline 1971 – Starbucks Coffee. and Spice store (coffee bean roasting) opened in Seattle’s Pike Place Market.

a San Francisco-based company 2003 – Starbucks acquired Seattle’s Best Coffee 2005 – Introduced Starbucks Coffee Liqueur. Acquires Ethos Wate     . 2000 – Acquired Hear Music. 1999 – Starbucks acquired Tazo Tea.Timeline  1996 – Starbucks’ began selling bottled Frappuccino.

 Satisfy customers by all means.  Employees’ contribution and involvement in making Starbucks a better company .Corporate Values and Business Principles  Building a Company with Soul  Opposing Franchising because of Quality Control and Culture  Only selling coffee beans without artificial flavors.

” .”  Environmental Mission Statement:  “Starbucks is committed to a role of environmental leadership in all facets of our business.Mission Statements  Company Mission Statement:  About Starbucks “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.

• Embrace diversity as an essential component in the way we do business. • Contribute positively to our communities and our environment. and fresh delivery of our coffee. roasting.Mission Statement Six guiding principles: • Provide a great work environment and treat each other with respect and dignity. . • Recognize that profitability is essential to our future success. • Apply the highest standards of excellence to the purchasing. • Develop enthusiastically satisfied customers all of the time.

and providing a great work environment for their partners (employees).Corporate Social Responsibility  “Starbucks focuses its efforts on improving social and economic conditions for coffee farmers. Education.  2004 EnviroStars Recognized Leader Award – for its community service and environmental activities . minimizing environmental impact. worldwide relief and development organization (Health. and Humanitarian aid)  Provides financial support to community literacy organizations  Participate in local charitable projects.”  Establish the Starbucks Foundation in 1997  A major contributor of CARE. making a positive contribution in the communities where they do business.

Starbucks’ Strategy  Rapid store expansion strategy • Domestic store expansion • International store expansion • Employee Training and Recognition • Real Estate. Planning. Store Design. and Construction • Store ambience  Product  Coffee Line purchasing strategy .

Starbucks’ Strategy Rapid store expansion strategy • Domestic store expansion − A three-year expansion strategy − “Starbucks everywhere” approach • International store expansion − Company-owned and company-operated stores or licensing − Created a new subsidiary. Starbucks Coffee International − Expanded its consumer products channel in South Pacific region .

Store Design.Starbucks’ Strategy • Employee Training and Recognition − Systems to recruit. Planning. and Construction − A broad range of store formats (the right image and character) − A “stores of the future” project team − High-traffic. high-visibility store locations − Control of average store opening costs − Wi-Fi availability at stores . hire and train baristas and store managers  screening  training programs  awards for partners • Real Estate.

Starbucks’ Strategy • Store ambience − The concept of “everything matters” − Assessment of standards .

Starbucks’ Strategy Product Line •Wide range of products choices •Special product promotion •Selling music CDs •Joint ventures Pepsi Co Dreyer’s Grand Ice Cream  Jim Beam Brands •Acquisitions  Hear Music  Ethos Water •Starbucks Cards •Partnership with Bank One .

Starbucks’ Strategy Coffee purchasing strategy • Building relationship with growers and exporters. • Using fixed-price purchase commitment and purchasing coffee future contracts • Contributing to the sustainability of coffee growers and helping environment conservation • Purchasing and marketing Fair Trade Certified coffee • Promoting coffee cultivation methods that protected biodiversity and maintained a healthy environment . and searching out varieties and sources that would meet Starbucks’ standards. checking on agricultural conditions and crop yields.

Industry and Competitive Analysis  Coffee Industry   C Corporate Values and Business Principles Mission Statements Corporate Social Responsibility   .

Industry and Competitive Analysis  Coffee industry • Coffee drinking trend • Coffee beans production  Competitor analysis • • • •    Future goals Current strategy Assumptions Capabilities Generic competitive strategy PEST analysis Site 7S analysis .

namely “basic” and “specialty”. − Coffee is an affordable luxury. − Coffee shops are a great place to meet people. − Americans substitute specialty coffee for alcohol. − Consumers are more knowledgeable about coffee.Industry and Competitive Analysis Coffee industry Coffee drinking trend − Coffee is the second most consumed drink after water. Coffee beans production − In 1994. − There are two types of Coffee. coffee was the second most traded commodity after Oil. .

Industry and Competitive Analysis Competitor analysis 2 Types of Competitor: Coffee shops and restaurants  Nationwide coffee manufacturers (rival brands of specialty coffee)  .

Assumptions − Competitors’ assumptions about themselves − Competitors’ assumptions about the industry and other companies in it  .Industry and Competitive Analysis Competitor analysis Future goals   To grow bigger To better position themselves as an alternative to Starbucks  Current strategy Merger of local and regional chains of coffee shops etc.

Industry and Competitive Analysis Competitor analysis  Capabilities (areas of competitors’ strengths and weaknesses) − Product − Dealer/distribution − Operations −R&D − Financial strength − Organization & managerial ability − Personnel turnover .

Industry and Competitive Analysis Generic Competitive Strategy .

special requirements.Industry and Competitive Analysis Focused differentiation Serve niche buyers better than rivals Buyers have distinctive preferences. or unique needs Have unique capabilities to serve needs of target buyer segment Big enough to be profitable and offers good growth potential Costly or difficult for multi-segment competitors to meet specialized needs of niche members Starbucks has resources and capabilities to effectively serve an attractive niche Few other rivals are specializing in same niche .

PEST Analysis Political Influences − Relationships between U. and countries producing coffee beans − Environmental regulations − Industry-specific regulations Economic Influences − Demand for food and beverages − Customers’ buying power − Exchange rate & taxation .S.

PEST Analysis Social Influences − Trend − Consumer preferences − Changes in lifestyle and occupation − Education Technological Influences − advances in manufacture − biotech and agricultural development − IT developments .

Site 7S Model Strategy Rapid store expansion strategy Line Product Coffee purchasing strategy .

some shift supervisors and 16 partners/baristas Assistant Manager Shift Supervisors Baristas Baristas Baristas . one assistant manager.Site 7S Model Store Manager Structure There are one store manager.

Career Power and Career Power for Coaches Workshop. mental health. crisis counseling. . and medical costs for terminal illness up for 29 months. stock option plan. and − Health care benefits include preventive care. − Awards for partners. dental care. Servant Leadership Workshop. health care benefits. eye care. Star Skills. Coffee Master Program. − Employees trainings that include basic 24 hour-training. chemical dependency. which range from frequent awards to highlevel cash awards.Site 7S Analysis Staffing –Employee benefits package includes base salary.

Just-In-Time) − Information system to support business operations.e. − .Site 7S Analysis Systems − Centralized control over individual stores by headquarters − Total Quality Management (i.

Site 7S Analysis Skills − coffee making − customer service − sales techniques .

Site 7S Model Style – Increase motivation through reviews and raises. – Employees are allowed to make decisions and participate in .

Site 7S Model Shared Values − Fun working environment − Treat each other with respect and care − Diversity is encouraged. − CSR. − The importance of profitability for future success . − Respect employees by calling them partner. − Maintain highest quality standards for products − Satisfy customers and compensate the unsatisfied ones.

.matched to industry and competitive conditions?  The first of these factors was their ability to design a strategic approach to growth that quickly demonstrated the feasibility of their business model and took advantage of some key demographic groups.Does Starbuck’s strategy seem to be well.

Does Starbuck’s strategy seem to be wellmatched to industry and competitive conditions? Cont… Ability to attract the highest-quality employees through the implementation of a superior healthcare plan while reducing costs and giving equity ownership to all employees. .

Does Starbuck’s strategy seem to be wellmatched to industry and competitive conditions? Cont…  The strategic alliance they had with conservation international allowed them to create a sustainable supply chain of high quality coffee. .

Does Starbuck’s strategy seem to be wellmatched to industry and competitive conditions? Cont…  A community environment in which casual social interactions could take place. .

Does Starbuck’s strategy seem to be wellmatched to industry and competitive conditions?  Ability to adapt to the changing dynamics of their consumer demographics. .

Many cost advantages can be independent of scale and may be gained by establishing one's position in an industry early. their advantages were small.  . favourable locations and a learning experience curve. companies with national distribution in the coffee industry at large experienced some discounts through bulk purchases and superior infrastructures. differentiating features serving the unique needs of a niche or developing resource strengths and competitive capabilities rivals can’t imitate or trump?  The specialty coffee industry does not put a high premium on economies of scale. These can be referred to as first mover advantage. Some of these advantages come from proprietary product technology.Does the strategy seem to be keyed to a cost advantages. favourable access to raw materials. Although.

Does the strategy seem to be keyed to a cost advantages. As the industry matures. The strategy of differentiation is particularly attractive because it offers insulation from the price competition inherent in a cost leadership strategy. the ability to access distribution channels and select from the highest quality coffee beans has becoming increasingly difficult.  . differentiating features serving the unique needs of a niche or developing resource strengths and competitive capabilities rivals can’t imitate or trump?  There is also numerous cost disadvantages imposed on new entrants that are independent of the economies of scale considerations. The goal should shift away from differentiating physical attributes and towards differentiating the organizations systems and bureaucratic set up as well as their image within the industry.

To encourage customers to use porcelain cups. using financial incentives. further differentiating themselves. seeking to compost or otherwise recycle food waste. to recharge plastic Starbucks cards as opposed to purchasing a new one. they still have much room to improve. thus. and encouraging customers. Other examples of ways in which Starbucks could enhance both its actual green bona fides and its image as an environmentally friendly company would include: selling to go mugs and re-usable sleeves at affordable prices. Starbucks could offer inhouse drinkers who choose to use the porcelain cups a discount. .What is there about Starbuck’s strategy that can lead to sustainable competitive advantage? Many efforts are being made at Starbucks to enhance their image as being environmentally friendly. as is true for all modern corporations. implementing recycling bins.

Thank You All .

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